Kazakh President sets out five priorities for Kazakhstan’s “Third Stage of Modernisation”
In his annual address to the nation, Nursultan Nazarbayev, the President of Kazakhstan, announced five main priorities as part of what he described as “Kazakhstan’s third stage of modernisation”. The priorities are aimed at ensuring economic growth and supporting the country to become one of the top 30 most developed countries in the world by 2050.
The five priorities are: Accelerationof technological modernisation of the economy, improved business environment, macroeconomic stability, improved quality of human capital and institutional reforms, including improved security and more action to tackle corruption.
President Nazarbayev said in his annual address: “I am setting the task of ensuring the implementation of the Third Modernisation of Kazakhstan. It is necessary to create a new model of economic growth that will ensure the country's global competitiveness.”
He added: “This modernisation is not a plan to combat current global challenges, but a reliable bridge to the future, to meet the objectives of Kazakhstan 2050 Strategy. It will be carried out on the basis of the 100 Concrete Steps Plan of the Nation.”
The Head of State also instructed the Government to developa package of measures for the technological re-equipment of basic industries by 2025.
The annual address followed a special announcement given by the President last week, in which he set out bold plansto increase the powers of parliament. President Nazarbayev stated that these constitutional reforms are aimed at furthering the democratic development of Kazakhstan, as the Government will be accountable to parliament.
Factsheet on the Third Modernisation of Kazakhstan
President Nursultan Nazarbayev’s annual address was published on 31 January. The President announced the Third Modernisation of Kazakhstan, which involves creating a new model of economic growth that will ensure the country's global competitiveness. The modernisation includes five main priorities, which are designed to ensure economic growth and sustainable development to help Kazakhstan join the top 30 most developed countries by 2050. The annual address followed a special announcement given by the President last week, in which he set out bold plans to increase the powers of parliament. President Nazarbayev stated that these constitutional reforms are aimed at furthering the democratic development of Kazakhstan, as the Government will be accountable to parliament.
Five Priorities of the Third Modernisation of Kazakhstan
1. First priority – Accelerate technological modernisation of the economy
- Cultivate new industries created with the use of digital technologies and develop the country’s prospective sectors such as 3D-printing, e-commerce, mobile banking and digital services
- Give impetus to the development of traditional basic industries (industry, agriculture, transport and logistics and construction)
- Significantly increase the productivity of labour through widespread introduction of automation, robotics, artificial intelligence and exchange of “big data”
- Continue industrialisation with emphasis on the development of competitive export industries in priority sectors
- Integrate into global chains of production and distribution of goods and services by attracting transnational companies
- Implement a joint investment programme with China to establish production facilities
- Retain strategic importance of the metallurgical-mining, oil and gas complexes The agrarian sector should become the new driver of the Kazakh economy
- Develop the new Eurasian logistics infrastructure and increase the volume of transit
- Develop the construction sector, which must become a driver of the domestic economy
- Modernise the labour market by developing new industries that will incorporate new technologies
2. Second priority –Improve and expand the business environment
- Ensure that by 2050, small and medium business contribute at least 50% to the country’s GDP
- Expand the use of microcredit in order to ensure entrepreneurs are guaranteed the support they need
- Adopt measures to decrease all cost types for business, including the cost of services in energy, transport and logistics, as well as housing and communal services
- Achieve a decrease in the share of the state involvement in the economy to 15% of GDP
- Transfer a number of state services to business and expand public-private partnerships (PPP)
- Do not allow price and tariff collusions
3. Third priority – Macroeconomic stability
- Achieve the phased reduction of inflation to 3-4% in the medium term
- A reset of the financial sector is needed. The National Bank is instructed to develop a set of measures to improve the recovery of the banking sector
- Further develop the stock market and further increase the opportunities for people to invest their savings in various types of securities
- Radically improve the efficiency of budget spending - check the effective use of funds by ministries and departments
- Reduce step by step the size of the guaranteed transfer from the National Fund to two trillion tenge by 2020
- Build a monitoring and control system for the external and internal quasi-public sector loans
4. Fourth priority – improving the quality of human capital
- Reform the education system and reduce the gap in quality of education between urban and rural schools
- Start the “Free vocational education for all” project – free education that will cover unemployed and self-employed young people and people of working age who do not have a professional education
- Reform the health care system, including introducing compulsory social health insurance system from 1 July
- Social security initiatives:
- From 1 July 2017 pensions for 2.1 million retirees will be increased by 20%
- From 1 July 2017 the size of a one-time grant for a birth will be increased by 20%
- from 1 January 2018 the threshold for providing targeted social assistance will be raised from 40% to 50% of the minimum living cost
5. Fifth priority – institutional change, security and the fight against corruption
- Ensure that activities on the implementation of best practices and the OECD recommendations is in the framework of the Third Modernisation
- Continue to carry out reforms aimed at protecting private property, the rule of law and the equality of all before the law
- Ensure a secure state, free from the threat of terrorism, by preventing religious extremism propaganda and educating the youth
- Fight against cybercrime by creating a “Cybershield of Kazakhstan” system
- Intensify efforts to identify and eliminate the causes of corruption
Long-Term Planning Has Been, Will Continue to Be Key to Kazakhstan’s Success
in EDITORIALS on 3 FEBRUARY 2017
Good leadership requires a relentless focus on the long-term rather than just responding to immediate events or pressures. It is an approach that has served Kazakhstan well in its first 25 years as a modern country and has been reinforced in recent days.
First over the last week, the President has proposed political reforms to share power, strengthen parliament and boost accountability. It was a signal of Kazakhstan’s determination to ensure the modern institutions and democratic processes needed to move the country forward are in place.
This week also saw an equally comprehensive plan to deliver the third stage of the country’s economic modernisation. Its aim is to set Kazakhstan firmly on track to join the most developed countries within the 2050 timetable, with all the improvements in prosperity and quality of life this will bring to our citizens.
President Nursultan Nazarbayev’s state-of-the-nation address touched almost every aspect of the country’s economy and the lives of its people. It looked beyond the current difficult global economic conditions to what is needed to prepare the country for the challenges and opportunities in the decades ahead.
There was a commitment to continue reducing state ownership and control of the economy to around 15 percent of GDP. There was new encouragement for private-public partnerships as a way of introducing new funding and ideas. Red tape is to be reduced and access to start-up finance improved to provide the right conditions for start-ups and small businesses – the engines of growth and employment across the world.
What was clear, too, was a determination to strengthen the attractiveness of the economy to foreign investment, a major reason for the country’s impressive economic performance over the last 25 years. The new Astana International Finance Centre is seen as key to this ambition. Domestic companies, big and small, and overseas partners would also all be helped by the commitment to a stable macro-economic climate with low inflation and a rejuvenated banking sector and moves to enhance property rights and the rule of law.
At the heart of the package were measures to accelerate the modernisation of the economy. This went beyond the urgent need to develop new digital industries, such as 3D printing or e-commerce to ensure the technological revolution transformed the productivity and quality of traditional sectors. There was special mention, for example, of the importance of strengthening the energy and mineral industries.
Agriculture, too, was hailed as an important driver of economic growth. With improved productivity, Kazakhstan can become Eurasia’s bread-basket with equally rich potential for the processing of a wide variety of crops for export. Improved transport links to maximise the country’s position as a global bridge will make speedy access to export markets easier.
Successful modernisation across the economy is seen not just as a way to increase economic growth but to provide high-skilled jobs. There is recognition in the plan that many unskilled jobs around the world will inevitably disappear in the decades to come. This reinforced the importance of education so that Kazakhstan produces the labour force equipped for the opportunities of the future.
There was a promise to close the gap of educational attainment between rural and urban areas. The focus on the English language in schools is another example of the way the government is preparing its citizens and companies to compete internationally and investing in the country’s human capital. Older citizens are also to benefit with a significant increase in pensions while health reforms should ensure the population received the affordable, high-quality care expected in a highly-developed nation.
It is, by any standards, an ambitious plan to secure the future prosperity of the country and its citizens. It will be a remarkable achievement if Kazakhstan can join the ranks of the world’s 30 most developed countries. But then few people would ever have predicted a nation which inherited a ruined economy 25 years ago would already be ranked within the top 50. It is a performance which proves how important it is to keep your eyes always on the long-term.
Kazakh Leader Outlines Five Priorities of Kazakhstan’s Third Stage of Modernisation
BY AIGERIM SEISEMBAYEVA in NATION on 1 FEBRUARY 2017
ASTANA – Kazakh President Nursultan Nazarbayev’s 2017 address to the nation, published Jan. 31, focuses on what he termed a new, third stage of the country’s modernisation. It consists of five top priorities that are to ensure economic growth above the world average and bring the nation closer to its goal of joining the top 30 most-developed countries.
Kazakhstan passed its 25-year development phase with honour, said the head of state. He evoked the beginning of the country’s tenure on the United Nations Security Council, the upcoming EXPO 2017 international specialised exhibition and Universiade 2017 in Almaty among the nation’s achievements and successes.
“In 2014-2016 alone, 1.7 trillion tenge (US$5.2 billion) was additionally allocated to support the economy. This provided opportunities for economic growth, business support and creation of over 200,000 new jobs. This resulted in a 1-percent GDP growth in 2016. This is particularly important in the current difficult conditions,” the address reads.
The world today is witnessing the fourth industrial revolution. The digitalisation of the economy, Nazarbayev noted, will make entire industries disappear and create fundamentally new ones.
“Great changes are taking place before our very eyes – it is both a challenge and a historic opportunity for the nation. Today, I put forth the task of ensuring the implementation of the third modernisation of Kazakhstan. It is necessary to create a new model of economic growth that will provide the country’s global competitiveness,” he said.
The first stage of modernisation was forming an entirely new state based on the principles of a market economy in the 1990s. The second was implementing Strategy 2030 and creating a new capital – Astana.
“This modernisation is not a plan to combat current global challenges, but a reliable bridge to the future, to meet the objectives of Kazakhstan 2050 Strategy. It will be carried out on the basis of the 100 Concrete Steps Plan of the Nation,” said the President.
The address further outlines the five priorities for Kazakhstan’s modernisation.
The economy’s accelerated technological modernisation
Within this priority, Nazarbayev is aiming to create new industries based on digital technologies, such as 3D printing, mobile banking, e-commerce and digital services. The President instructed the government to develop a “Digital Kazakhstan” programme and establish an international IT startup technological park, based on some of the premises to be left vacant after EXPO 2017 which will attract entrepreneurs and investors from around the world. This also includes developing scientific and innovative potential on the basis of Nazarbayev University and Alatau IT City near Almaty.
In addition to creating new industries, impetus is to be given to developing traditional ones. This implies increasing productivity in areas like automation, robotics, artificial intelligence and big data exchange. The government was instructed to develop a package of measures for the technological re-equipment of basic industries until 2025.
Attention was also attached to export promotion. The address indicates exporters are to be provided with support based on the ‘one stop shop’ principle. The President instructed forming a governmental council with business representatives to discuss export policy and also ordered the government and akims (governors and mayors) to develop a unified export strategy in cooperation with businesspeople by Sept. 1.
Nazarbayev emphasised metallurgical and petroleum industries are to remain strategic areas while seeking new markets and activating geological exploration works.
The agrarian sector is to become the new driver of the economy. Kazakhstan is fully capable, in Nazarbayev’s words, of producing organic foods. The “Made in Kazakhstan” brand must become a high standard in this sphere. At the same time, he set the goal for Kazakhstan of becoming the “bread basket” of Eurasia in terms of grain production.
The President also outlined logistics and construction as parts of the first priority, highlighting the need to ensure free transit of goods, establish and modernise transport corridors and transfer innovation technologies into construction and producing building materials. The Nurly Zher programme will provide housing for 1.5 million families in the coming 15 years.
Modernising the economy will lead to releasing the labour force from traditional industries. In this regard, the President instructed the government to create conditions for a controlled flow of workers into other sectors.
Improving and expanding the business sphere
One of Kazakhstan’s strategic goals is to ensure small- and medium-sized businesses account for at least 50 percent of the GDP by 2050. In order to achieve this goal, the government must support mass entrepreneurship by providing micro-loans of up to 16 million tenge (US$48,800), reducing all types of business costs, optimising public services and deregulating the business sphere. The President also initiated introducing a doing business rating across Kazakhstan, an analogue of the World Bank’s Doing Business report, with a special prize awarded to pioneer regions annually on Industrialisation Day.
The state’s share in the economy is to be reduced to 15 percent of the GDP. This should be achieved through transparent and effective privatisation and reorganisation of Samruk-Kazyna, Baiterek and KazAgro holdings, delegating to business everything that can be done by the private sector. Only natural monopolies and implementing strategic projects should remain in the state’s function.
Public-private partnerships (PPPs) are to become primary mechanisms of infrastructure development, including social, housing and utility sectors. All possible types and forms of PPPs must be used in order to attract private equity.
The President also noted the importance of preventing price and tariff collusions by revising the legislation to identify regulations that hinder competition.
In this section, the President indicated the task of restoring the stimulating role of the monetary policy and involving private capital into financing the economy.
Inflation is to be reduced to 3-4 percent in the medium term and the financial sector should be “reset.” The latter includes rehabilitating the banking sector, increasing the responsibility of audit companies, ensuring shareholder transparency and improving corporate governance.
Further developing the stock market, increasing budget spending efficiency, fiscal decentralisation and improving tax administration mechanisms are also mentioned as main directions of macroeconomic development.
“The National Fund should be used more efficiently. Guaranteed transfer from the National Fund must be gradually reduced to 2 trillion tenge (US$6.1 billion) by 2020,” the address reads.
Improving the quality of human capital
Education is the core of the new model of economic growth and should be focused on developing critical thinking abilities, skills of unaided information search, IT knowledge and financial literacy. Nazarbayev noted the importance of transitioning to trilingual education. While Kazakh remains the core language, several subjects at schools will be instructed in English starting in 2019.
“This year, the Free Vocational Education for All project starts on my initiative. First, free education should be provided to unemployed and self-employed young people and people of working age who do not have professional education. It is necessary to give impetus to the development of the vocational education system for training specialists in the new industries,” said the President.
The fourth priority also includes healthcare issues. Raising the scope of IT use in the healthcare system, introducing compulsory social health insurance, legislative regulation of drug prices, increases in pensions, lump sum allowances and living wage are all named among priority tasks.
Institutional reforms, security and fight against corruption
Implementing the best practices and recommendations of the Organisation for Economic Co-operation and Development (OECD) and protecting private property, the rule of law and equality before the law will remain pivotal in the new economy model.
Nazarbayev addressed the issue of the fight against terrorism, noting it should become more proactive.
He also tackled the problem of cybercrime, instructing the government and the National Security Committee to create a “Cyber Shield of Kazakhstan” system.
Turning to the fight against corruption, the President noted the necessity of identifying and eliminating the causes and prerequisites of corruption, rather than eliminating its consequences. Creating a single procurement system is one of the proposed steps in this direction.
These are the key areas of development within the third stage of Kazakhstan’s modernisation, according to the President’s address. Kazakhstan has no other choice but to accept the challenge of the times with dignity and solve the issues to further modernise the country, he said.
“Having gained a unique wealth of experience of creating a state, we have entered a new stage. I am sure that no matter what difficulties are ahead of us, we will overcome them. Our main strength is in our unity. We will turn Kazakhstan into a more prosperous country for our descendants!” the President said.