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State P rogram of F orced I ndustrial- I nnovative D evelopment for 2010-2014. Astana 2 2 February 2010. System of state planning. Strategic Development Plan of Kazakhstan untill 2020. State Program of Forced Industrial - Innovation Development. Other state programs.

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system of state planning
System of state planning

Strategic Development Plan of Kazakhstan untill 2020

State Program of Forced Industrial-Innovation Development

Other state programs

Regional development programs

Sectoral programs

The strategic plans of state bodies

2

slide3

1. GDP growth by 50% from 2008

2. Labour productivity increase in manufacturing industry by 50 %, and in separate sectors by 100 %

TARGETINDICATORS

3. Increased proportion of non-oil and gas exports by 40%

4. Reduction of energy intensity of GDP no less than 10% from 2008

5. Increase of active enterprises up to 10 % from number of operating enterprises

3

what to develop
WHAT TO DEVELOP ?

PRIORITY DIRECTIONS

NEW INNOVATIONS(2010-2014)

  • Metallurgy and manufacture of metal products
  • Oil refining and oil and gas infrastructure
  • Chemical and pharmaceutical industry
  • Agro-industrial complex
  • Defense industry
  • Construction industry and production of construction materials
  • Transport and infocommunications
  • Engineering industry
  • Uranium industry
  • Light industry
  • Tourism
  • Space activity

Modernization of Existing Enterprises

  • Maintenance of productivity growth
  • Creating and improving infrastructure (e / energy, pipelines, roads)
  • The high level of performance (80-100% of the world leaders)
  • High value added
  • Export-orientation
  • Competitiveness in the regional market

Creation of new high-performance enterprises

Selective support of enterprises in the

“economic future”

  • Innovativeness
  • Improving telecommunications infrastructure
  • Influence on productivity increase in traditional sectors

4

where to develop the scheme of rational distribution of productive capacities
WHERE TO DEVELOP? The scheme of rational distribution of productive capacities

Map of the balanced development of industries, infrastructure and resource bases

Long-term plans for development of FEZ, and industrial zones

Budgeted balance sheet of energy resources (electric power, oil, gas, coal)

Budgeted balance sheet of the development of mineral-raw material base, water and land resources

Budgeted balance sheet of labor forces

Plans for the development of pipeline, rail, road, sea and air transport infrastructures

5

how to develop the new approaches to the basic support policies
HOW TO DEVELOP? The new approaches to the basic support policies

Improving the business environment:

need of a "new wave“ of entrepreneurship

Development of innovation and promotion of technological modernization: focus on productivity

5

1

Competitive professional personnel training:

from stability to mobility

Infrastructure and resource provision:

Global expansion

6

2

Direct investment:

Kazakhstan is the best place for investment in the region

Technical regulation: creation of quality infrastructure

3

7

Trade policy: aggressive export, Kazakhstan is a regional broker, an expert on Asia

Fee policy:

medium-term stability, enabling business planning

8

4

6

slide7

INTEGRATED SUPPORT PROGRAM

Republican level

Regional level

1

2

3

4

Program

Investor 2020

Productivity 2020

Export 2020

Business Road Map2020

Basic Operator

Ministry of Economic Development and Trade of the Republic of Kazakhstan, Akims (local mayors)

Ministry of Industry and New Technologies of the Republic of Kazakhstan

Ministry of Industry and New Technologies of the Republic of Kazakhstan

Ministry of Industry and New Technologies of the Republic of Kazakhstan

Mission

Creation ofconductive conditions for attracting direct investment in non-oil and gas sectors of the economy.

Increasing productivity of existing enterprises and creation of new industries.

Market domestic products in foreign markets.

Development of entrepreneurship in the regions

Target group

Investors

Big and medium-sizedenterprises

Big, small and medium-sizedenterprises

Small and medium-sizedenterprises

7

ПФИИР

slide9

FIRST DIRECTION

STIMULATION OF INVESTMENTS

9

h igh competition for fdi in world market
HIGH COMPETITION for FDI in WORLD MARKET

4,824

N/a

1.8

33

Bulgaria

6,605

6.4

3.9

45

Kazakhstan

Ukraine

Russia

Hungary

2,934

N/a

7.3

15

Saudi Arabia

15,322

2.9

10.9

41

India

China

Poland

13,845

5.5

12.0

76

Azerbaijan

Slovakia

Georgia

17,583

6.5

9.6

36

Estonia

Competition for Kazakhstan

Natural Resources / GDP1

Ведение бизнеса2

Labour costs per hour (USD)

Geographical proximity3

Nominal GDP / capita (USD)

18,488

54.5

16

17,301

N/a

11.0

22

11,826

12.3

3.8

120

8,513

15.0

3.3

70

3,931

8.9

2.6

145

3,258

9.7

2.2

83

1,035

4.2

1.0

122

Sources:

WMM; EIU World Data;

World Bank, 2008

1 The estimated contribution of natural resources in GDP, including the extraction of natural resources, electricity, gas, water

2 The World Bank ranked by the degree of ease of doing business

3 Geographical proximity to Kazakhstan

10

investment climate and opportunities
INVESTMENT CLIMATE AND OPPORTUNITIES
  • Kazakhstan GDP rate is 2 times larger than the economies of other countries in Central Asia combined
    • Kazakhstan has joined the Customs Union with Russia and Belarus, i.e. market with a population of more than 170 million people. A combined GDP of 2 trillion USD is opening to investors
    • Investment climate in Kazakhstan is the most favorable in the CIS
    • Kazakhstan has the most liberal tax regimeamong the countries of the Customs Union

11

state support measures
STATE SUPPORT MEASURES
    • Exemption from payment of customs duties on imports of equipment, components and spare parts, raw materials in accordance with the Law of the Republic of Kazakhstan "On Investments".
      • State natural grants in accordance with the Law of the Republic of Kazakhstan "On Investments"
      • Favorable tax regime and granting of preferences (within the SEZ and individual Investment agreements)
      • Ensuring minimum long-term public order and order of national companies
    • Support measures under the Road Map "Business - 2020"
  • subsidy assistance of interest rates on loans
  • partial loan guarantees
  • development of industrial infrastructure
  • staffing

12

slide13

SECOND DIRECTION

INVESTORS SERVICE SUPPORT / ASSISTANCE

IN ATTRACTING INVESTMENT

13

world experience
WORLD EXPERIENCE

Currently, investment promotion agencies are successfully operating in more than 160 countries.IPA is an important mechanism to attract FDI, which acts as a key element in shaping the image of the country as a recipient of investment, improving investment climate and attracting foreign investors.

14

customer support directions
Tools:

Informational and promotional activities to promote investment opportunities of Kazakhstan (business forums, road show, printed materials, news reports in international media)

Informational and analytical activities (accounting function, database, research)

Measures to accompany foreign investors

National investment interactive web site of the Republic of Kazakhstan and Investment Atlas of the Republic of Kazakhstan

Operator for work with foreign investors – «KAZNEX INVEST»

CUSTOMER SUPPORT DIRECTIONS
  • For Kazakh business
    • Searchfor investor
  • For foreign investors:
    • Search for Kazakhstani partner
    • Accompany investor
    • Organization of meetings with the government representatives
    • Presentation of update information on projects and the law

15

slide16

Approaches to realization

PRODUCTIVITY- 2020

16

slide17

GUIDELINES AND FACILITATING TOOLS OF DEVELOPMENT OF LABOUR PRODUCTIVITY

1.Optimization of productivity and business processes

The budget programs on financing of management technologies introduction, service support through the design officeand technology parks

2. Accelerating and cheapening of new products assimilation

Innovation grants to purchase technology, conductresearch and development work, service and financial support through the design office

Assistance for enterprises to improve their effectiveness through cost reduction

Innovation grants for conducting research and development work, patent, service support through technology parks,design office

services, tax preferences

3. Cheapening and accelerating of development process of own new products

4. Information support

Service support through technology parks, instructional materials “To assist enterprises”

17

slide18

WORLD EXPERIENCE IN SUPPORTING DEVELOPMENT OF LABOUR PRODUCTIVITY ACTIVITIES

In Canada there is a policy of development of labour productivity in three key directions:

  • Tax subsidies for investment in new equipment – renovation of basic funds is the key driver
  • The creation of technology transfer centers for the rapid spread of the best world technologies and practices in the country
  • Stimulation of the labor migration to provide rapidly growing regions with skilled workers

In other regions of the country there are grant programs through which companies can apply for reimbursement of services to 40% of the costs for purchasing services from consulting companies, which increase labor productivity (industries – IT, agribusiness, biotechnology, manufacturing)

Finland is grant funding of innovation, aimed at qualitative improvement of development of labor productivity

  • Reimbursement of expenses on implementation of researches and developments for enterprises
  • Promotion of cooperation among the scientific organizations and private sector

18

slide19

GRANTS

Principle of grants co-financing

Grants for project feasibility study

Share of the state: 80%,

Duration: 6 months

Development result: project feasibility study, contracts of intent, memorandum

Terms: Guarantee of own funds (banking, escrow) 20%

Share of state: 80%,

Duration: 24 months

Development result : The act of introducing

Terms: Guarantee of own funds (banking, escrow) 20%, a preliminary agreement on implementation

Grant for research and

development work

Existing types of grants

Grant for technology transfer

Share of state : 80%,

Duration: 12 months

Development result: The act of introducing

Terms: Guarantee of own funds (banking, escrow) 20%,

Productivity increase

Grant for patenting

Duration: 12 months

Development result: patent

Terms: Positive report, payment to patent office

Grant for startup

Share of the state: 90%,

Duration: 12 months

Development result: start-up company

Terms: Presence of innovative ideas

New types of grants

Grant for staff development

Share of the state: 80%,

Duration: 6 months

Development result: new skills in staff, qualification certificates

Terms: Guarantee of own funds (banking, escrow) 20%

Grant to expand product line

Share of the state : 80%,

Duration: 12 months

Development result: new products, services

Terms: Guarantee of own funds (banking, escrow) 20%

19

slide20

MODEL OF DESIGN OFFICE ACTIVITY

National company/ major consumer of engineering products

Determination of requirements for engineering products

Acquisition of design-technical documentation

Goods nomenclature

Search for companies to develop new products

JSC «Center for Engineering and Technology Transfer» andDesign office

Technical preparation of production

Technical documentation

Engineering services

Certification of products

Manufacturing of quality products under the agreement with the National company

Machinery enterprise

20

slide21

MODEL OF TECHNOLOGY PARK ACTIVITY

Analysis of needs of the innovative ideas customers

Conducting of the Forum with participation of business and government representatives

Formation priorities

Search for potentially commercialized innovative ideas

Competition and selection of applications with involving of expert committee

Business consulting, providing with office, assistance in patenting

Formation of a pool of prospective projects for industrial output

Commercial elaboration of innovative ideas

Providing of additional high-tech services by technology parks

Services of laboratory and engineering complex

Free for innovators in technology park

Financing of innovative projects and start-up companies

Venture financing and attracting of investors

Launching of new products

21

service support of export
SERVICE SUPPORT OF EXPORT

FIRST DIRECTION

23

slide24

SERVICE SUPPORT TOOLS OF EXPORT

About 350 companies are involved in the sphere of Kazakhstan's non-oil and gas products

In which annual stable exporters are 260 companies

  • Detailed analysis of structure of countries import on the level of 4 signs CNFEA (Definition of potential commodity markets)
  • Positioning of Kazakhstan's concrete products in the market at the level of 10 signs of CN FEA (Basis for export strategy of the enterprise)

Analytical support of exporters

ЭКСПОРТЕР

  • Trading missions in foreign countries
  • Meeting «Sellers and Buyers»
  • Selection of specialized foreign exhibitions
  • Negotiations with potential buyers

Search of partners and buyers

  • Composition of a database of purchasers
  • Estimation of conformity of production to requirements of purchasers
  • Participation in humanitarian exhibitions

Promote the humanitarian aid in the market

  • Calculation of logistics of optimal export routes
  • Instructions on procedures of customs registration
  • and preparations invoice documents

Optimal routes of export deliveries

  • worldwide distribution of the annual directory of export production
  • Presentation of domestic brands in foreign countries
  • Placing in specialized foreign catalogues

Target informing of foreign buyers

Informational aid

  • Instructional materials «an aid for exporters»
  • Countries export guidebook

In 2009 at the allocated budget of $2 millions with assistance of KAZNEX it concluded export contracts for the sum $120,0 millions (fiberglass pipes, fabricated metals, a fillet of a pike perch, sanitary production, textiles, etc.)

24

export grants
EXPORT GRANTS

Second direction

25

slide26

ГРАНТЫ ЭКСПОРТЕРАМ

Size of grants: 50% of confirmed expenses, but not more than established maximum limits of the applicants

Examples:

Product registration

abroad, expenses connected with

registration procedures

Expenses for registration of MPin Uzbekistanis$16 thousands./ per 1 unit of drug. JCSChimfarmregistrated 50 drugs (Pentalgin, Analgin, Tsitramon, Ascorbic acid and others.). Value of export – $4,945 ml.

Product certification abroad,expenses

connected with certification procedures

JCS JVBelkamit – receiving of certificatesASME (США),

NB – $23,6thousands,Value of export – $2,0 ml. (Vessels, capacities, metal structures)

Opening of the foreign

representations, trading

Points, expenses under the office maintenance

Compensation of expenses

LLP Tekstiline – opening representative Switzerland$30,5 thousand.

Value of export – $2,0 mln. (ready sportwear).

Participation in the specialized

exhibitions, expenses on rent of the area,

Registration payment

JSC «Aktyubrentgen» - Participation in an exhibition Public health services

– 2009, Moscow city - $20,2 thousands. Value of export -$1,256 ml.

(X-ray devices).

Goods promotion abroad,

branding, goods advertising

JCSRakhat – realization of PR-campaigns, Expenses for working out

and Design of packing (for entering in China market) – $27,7 thousands,Value of

export – $4,209 ml. (candies, chocolate)

26

mechanisms of grant provision
MECHANISMS OF GRANT PROVISION

Ministry of Industry and New Technologies of the Republic of Kazakhstan – PROGRAM ADMINISTRATOR

JSC «KAZNEX» -

Program operator

1. The announcement of competition in mass-media

2. Reception of requests and expertise of documents

3. Preparation of the conclusion for the Commission

4. Signing contracts with exporter

IECvia grants (MINT, MF, MEDT, MA, deputies of government, NDP «NurOtan», Non-governmental organization «Forumindustrialists», TIC, NEC «Атамекен»)

1. Consideration of the conclusions

2. Decision-making

I. Conclusion

II. Sollution

II. Compensational contract

I. Request

Challenge:

To provide transparency mechanism

Granting of export grants

Exporter of non-oil and gas economy

27

slide29

ОGENERAL CONDITIONS OF FINANCIAL SUPPORT

  • Funding stream: trade
  • Amount of financial backing:
  • - JSC “Kazakhstan Export Credit Insurance Corporation” up to $ 1 ml.
  • Terms:from 12 till 18 months
  • Interest rate : CIRR (2,38%) rate + rate of insurance (1,5%)+ rate of the bank (3%) =6,88%
  • Potential participants of the program:

existing and newly established export-oriented enterprises, priority - SMEs.

  • 10 pilot projects will be implemented in 2010

________________________________________________________________

Funding stream: preexport

  • Amount of financial baking:

- JSC“Entrepreneurship Development Fund“DAMU” up to $ 1 ml.;

- JSC“Development Bank of Kazakhstan”over $ 1 ml.

  • Interest rate: rate (7%) + rate of the bank (до 3%)+ remuneration of operator (up to 2%) = 12%
  • 5 pilot projects will be implemented in 2010
slide30

MECHANISM FOR FINANCING EXPORTERS

COMMERCIAL FINANCING AND RECURRENCE SCHEME FOR OBTAINING CREDIT

1. Export contract with delay in payment

Exporter

(apply to the bank with shipping documents)

Importer

3. Delivery

5. Payment on shipping documents

4. Insurance1,5% year.

Margin of the bank3% year.

Bank of exporter

Bank of importer

JSC “Kazakhstan Export Credit Insurance Corporation”

2. Letter of credit

4. CIRR tied deposit= 2,38% year.

  • Cost for Bank of importer = 1,5%(insurance)+2,38%(CIRR)+3%(margin of bank of exporter) = 6.88%
  • Advantages:
  • unsecured lending
  • 2-fold reduction in lending rates
  • Receipt of export earnings immediately in connection with shipment of goods
  • Stimulating demand of foreign buyers
  • JSC “Kazakhstan Export Credit Insurance Corporation”will be reorganized in Export and Credit Agency from January 1, 2012
slide31

WORK ON PROJECTS: TOOLS OF ACCOUNTING AND MONITORING OF PROJECTS

Selection of projects

Business initiative

  • Export-orientation;
  • Manufacture products with high added value ;
  • High productivity of labour;
  • Reduction of energy consumption ;
  • Development of Kazakhstani content;
  • Development and implementation of innovations and advanced technologies .

Accounting system

Map of Industrialization

Constantlyupdated list of priority investment projects with elements of monitoring, management and identifying the necessary point measures of state support.

Implementation

Republican Management Center

Mobilization of labour and financial recourses;

Personal control of timely implementation of investment projects put into operation this year.

structure of projects database
STRUCTURE OF PROJECTS DATABASE

Private initiative

Budget infrastructure projects

Projects of national holdings

Projects with direct foreign investment

Database of investment projects -

324 projects

Kazakhstan’s Map of Industrialization - 162 projects

Regional Map

65 projects

Republican map

97 projects

Attractive projects – 162 projects

slide33

Main page of the Base Map of Industrialization. It reflects the summary on investment projects of the Republic of Kazakhstan – dynamics of projects introduction per year, key indicators of projects’ realization, deployment of projects in Kazakhstan

evolutionary development of economy
EVOLUTIONARY DEVELOPMENT OF ECONOMY

Preparatory period

3 stage. Formation of the base of «future economy»

Aerospace, Biotechnology, IT, Alternative Energy

Preparatory period

2 stage. Creation of new economy

(high-production of works)

Start of the construction of new ventures with world leading companies participation in the niches identified by the master - plans. Stimulus measures( FEZ development, an increase in non-oil and gas export, foreign investors) has been elaborated.

Contribution to productivity growth

Preparatory period

1stage. Modernization of base economy

(increase of depth of raw materials processing)

Ensure put in operation of building and planned to construct republican and regional investment projects

Industry and regional development programs has been developed and approved.

Laws on industrial policy, FEZ, etc. have been developed.

2011

2012

2013

2014

2010

2009

slide35

Approaches to realization

ROAD MAP - 2020

35

general scheme of realization
General scheme of realization
  • Aim of the program is the creation of permanent job for account of entrepreneurship development in the regions
  • Ministry of Economic Development and Tradeof the Republic of Kazakhstanallocatesgeneral limitsof financial packing for each region
    • Limits defines on the basis of : 1) share of the region in population size; 2) share of the region in output of SME products.
  • Local executive bodies allocate general limits on directions of program realization on its own authority (with the approval of Ministry of Economic Development and Trade)
    • subsidization of interest rates on loans
    • partial loan guarantees
    • development of industrial infrastructure
    • service support to conduct of business
    • training, youth practices and social jobs (component will be introduced in 2011)

36

basic principals of the program
Basic principals of the program
  • Decision on projects funding is made by the financial organizations
  • Regional Coordinating Council makes a decision only on the possibility of subsidies and guarantees
  • The entrepreneur can be provided with integrated support within all tools of the program

37