Kazakhstan’s industrial base is the rising star of the non-oil economy. It has firm roots in the country’s pre-independence period—after which its significance was outshone by the country’s booming oil and gas industry. While still a part of the Soviet Union, machinery manufacture represented 15.9% of GDP in 1990, while in 2007 the figure shrank to 2.5% as the energy sector got into its stride. The Kazakhstani government has set ambitious goals to capitalize on the industrial sector, and the economy is currently reacting well to developments. The State Program for Accelerated Industrial-Innovative Development is aiming to increase the manufacturing industry’s share of GDP to 12.5% and increase manufacturing productivity by no less that 1.5 times. In addition, the share of non-raw materials exports is expected to rise to 40%, while local entrepreneurs will be encouraged.
The aim of the Business Road Map 2020 program is to ensure sustainable and balanced growth in the non-oil sectors, as well as the creation of new employment, while maintaining and improving existing work places. Some of the priority sectors in the road map are highly untapped or under-invested areas such as building materials, nonmetallic mineral products, metallurgy, metal processing, mechanical engineering, transportation, warehousing, tourism, health, agribusiness, light industry, and social services. President Nazarbayev noted that the program is designed to prepare and protect the Kazakhstani economy from
future shocks and move it away from commodity dependence. “The program is yielding significant results; 152 new industrial facilities worth KZT800 billion were put into service [in 2010 and] 23,000 regular jobs were created,” President Nazarbayev stated. All in all, by 2015 around 500 projects totaling KZT12 trillion are planned for implementation, with 200,000 full-time jobs set to be created. The Customs Union will also provide investment incentives for industry. These incentives come in the form of exemptions from customs duties on the import of capital goods as well as raw materials for the implementation of investment projects. The liberal tax regime in Kazakhstan—compared to Russia and Belarus—will also further improve the country’s business climate.
Kazakhstan’s specialty with regards to machinery lies with centrifugal pumps, insulated and fiber-optical wires and cables, electric transformers, and television receivers. Investment in machinery, tools, and inventories stood at 28% of total fixed capital investment in the first half of 2011, and machinery manufacture has seen a y-o-y bump of 15%. According to Ministry of Industry and New Technologies’ statistics, the volume of domestic production in 2008 amounted to KZT303 billion. The volume of exports, which totaled KZT154.5 billion, accounts for 2% of total exports. The Accelerated Industrial-Innovative Development Plan seeks to increase the manufacture of fabricated metal products.
To date, in light industry more than 80% of companies are SMEs, with approximately 80% of the industry using outdated equipment. In the near future, the Ministry’s plan will encourage the creation of incentives for the modernization and diversification of industries that process local raw materials in the textile, garment, leather, and footwear industries.
The first half of 2011 saw Kazakhstani automobile production increase to 1,012 cars, or by 3.1 times over the same period in 2010. Asia-Auto is the largest producer of cars, producing spare parts for Niva, Skoda, and Chevrolet. The country also has a number of plants that produce Kamaz cars.
Kazakhstan’s mining and metallurgical industry is the fastest growing sector of the country’s industry, and the most important component in the Kazakhstani economy after the oil and gas sector. As one of the country’s most competitive industries, the mining and metals industry produced 16.9% of total industrial output in 2009 and held a 19.6% share of total exports. Fixed assets of the industry amount to KZT2.2 trillion, or 17% of all assets in the country. The industry employs more than 164,500 people. The level of fixed assets in the sector has increased by almost 2.7 times from 2003 to 2009 and metal ore mining volumes grew by 3.5 times in the same period. The volume of investments in mining and the metallurgical industry in the next five years is projected to amount to KZT2 trillion. The industrialization program is also expected to create over 16,000 permanent jobs in the coming years. Investment in industrial fixed assets from 2003 to 2009 amounted to KZT1.42 trillion, 42% of which fell into the non-ferrous metals category.
Kazakhstan’s mining and smelting industry focuses on the export of raw materials and primary metals. The sector should develop gradually with increased investment and the consequent establishment of new iron and steel processing facilities, with a special focus on producing value-added materials necessary for high-tech products. This will open up possibilities to expand exports to foreign markets, as well as fulfil domestic demand.
CHEMICALS & PETROCHEMICALS
Kazakhstan has received praise for its long-sighted investment in downstream facilities in the form of value-added manufacturing and industrial and high-tech processes, as these bring the greatest profits and most long-lasting prosperity. KazMunayGas (KMG) is leading the project to construct the ambitious Kazakhstan Petrochemicals Industries (KPI) complex. The planned complex will be the country’s first integrated gas chemicals complex, producing high-quality polypropylene, polyethylene, and other petroleum-based products. The complex will include a 400,000 tons per annum (tpa) linear low-density polyethylene (lldPE) and high-density polyethylene unit, a 400,000 tpa low-density polyethylene (ldPE) unit, and a 450,000 tpa polypropylene (PP) plant. The plant aims to compete at international standards and will far outclass its CIS rivals.
In 2008 the chemical industry grew to $3.5 billion. Imports are mostly made up of rubber and plastics, perfumes, detergents, and cleaning agents, and form almost 80% of the market. Kazakhstan is, however, abundant with natural resources used for the production of chemicals and petrochemicals. There are rich reserves of potassium salt, borates, bromine compounds, sulfates, phosphorites, sulfur pyrites, wallastonite, and feedstock for the varnish and paint industry. Kazakhstan produces synthetic detergents and soap, mineral fertilizers, coarse microbiological proteins, chemical fibers and threads, synthetic resins, and plastics. There is a lot of untapped potential for the manufacturing of various petrochemical synthesis products, in particular ethylene, polypropylene, and resin.
AGRIBUSINESS & PACKAGING
Tobacco is a promising growth sector in the country’s agribusiness mix. The production of tobacco products or its substitutes grew 16% in the period between January and June 2011 compared with the same period in 2010. The scope for packaging is also growing in Kazakhstan as facilities expand. One area that is seeing growth is milk, which is traditionally sold loose. This is only one aspect of the industry that is developing as more productive cows are introduced and monitored to produce the best yield. Industry insiders are keen to keep up with the trends as this sector grows increasingly competitive. Mikhail Kamyshny, Managing Director of Tetra Pak Central Asia, told TBY, “There is a growing demand for economic products, and this means we constantly have to be looking to develop our product range.”
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