SETTING THE STAGE

Kazakhstan 2012 | DIPLOMACY | VIP INTERVIEW

TBY talks to Nursultan A. Nazarbayev, President of the Republic of Kazakhstan, on economic diversification, the country's application to host an international uranium bank, and foreign policy.

Kazakhstan has made impressive progress in economic development. Against a backdrop of new economic challenges and the ongoing global crisis, what action does the state intend to take to fully realize its full potential?

In order to achieve all we have, we have worked to diversify the economy, stimulate the production of innovative components, and support export-oriented industries and the development of SMEs. In 2011, the GDP growth rate was the highest in the last three years at 7.5%. Given the instability of the global economy, measures to prevent a recession in the economy include maintaining employment levels, providing social assistance to citizens of different categories, as well as ensuring financial stability. In addition, wisely using natural resources has allowed the accumulation of substantial financial capacity in the specially created National Foundation. To date, the international reserves of the National Bank, with assets from the National Fund, total more than $80.5 billion. With the establishment of “threshold" values, the dynamics of key macroeconomic indicators are systematically monitored on a constant basis. Additional incentives and support measures will be introduced should the economy enter into a risky zone. To reach our goals, we need to ensure annual economic growth of at least 7%.

Large-scale projects in the processing of raw materials and infrastructure development have been launched in Kazakhstan. What is the significance of such developments?

Indeed, in this year's State of the Union Address, I gave instructions on the implementation of a number of large industrial and infrastructure projects such as the construction of a gas and chemical complex in the Atyrau region, and an integrated refining complex in the Atyrau oil refinery for the production of complex fertilizers. Other large-scale projects that will be built comprise the West-North-Center gas pipeline, the Balkhash thermal power plant, the Beineu-Zhezkazgan and Arkalyk-Shubarkol railroads, and the 2,800-kilometer-long Kazakhstani section of the international Western Europe-Western China transit corridor. The total project cost will amount to KZT4.3 trillion, or about $29 billion, about $9 billion of which will be financed by the state. Funds allocated to the national welfare fund Samruk-Kazyna for the anti-crisis program of 2009-2010 will be re-allocated to this end. All of these global initiatives are aimed at addressing the key objectives of Kazakhstan's economy; a self-sustaining, independent domestic market of oil products and mineral fertilizers, the gasification of the northern regions, the enhanced energy supply of the southern regions, and the formation of transport arteries and international transit routes. In addition, the implementation of projects should provide a significant multiplier effect for the major regions of the country. These projects should stimulate the development of SMEs and new technologies. This is the basic idea of the industrial policy; the state sets the initial momentum, and the task of the private sector is to pick up and develop the initial initiative. For example, the construction of a gas processing facility for the production of polypropylene and polyethylene will not only diversify Kazakhstani exports, but also create conditions for the formation of a number of new high-tech chemical industries in Kazakhstan. The Western Europe-Western China transit corridor involves around 100 contractors, 30 asphalt producers, and 24 cement/concrete plants. The project involves over 35,000 employees. Since the beginning of the project, 21 production facilities were either built or modernized, including two cement factories in the cities of Taraz and Shymkent, a plant for the production of dowels for cement-asphalt coatings in Almaty, the upgrading of two bitumen plants in Kyzylorda and Shymkent, and factories for paint and geosynthetic materials production in Almaty. I would also like to note that the program of industrialization is not limited to the projects I have mentioned. During the 2010-2011 period, 389 projects worth around $12 billion have been implemented, which has created 43,000 permanent jobs. The implemented projects create an economic value of $3.4 billion annually. Now, in the framework of Kazakhstan's industrialization map, 220 projects are being implemented in a wide spectrum of industries including refining, agriculture, metallurgy, chemicals, engineering, construction, pharmaceuticals, and aerospace. The total cost of the projects is about $53 billion and provides for the creation of about 300,000 jobs.

“Our country has taken a worthy place in modern geopolitics, following a multi-level and multi-dimensional foreign policy."

The Foreign Investors Council has become an effective platform for strengthening dialogue between foreign businessmen and the government in recent years. What benefits does such close dialogue bring to the development of the business climate in the country?

The Foreign Investors Council was established in 1998 to provide for direct dialogue with investors operating in Kazakhstan, as well as operational solutions for issues concerning investment activities. One of the main functions of the council is to make recommendations on key areas of investment policy, as well as to improve the investment climate and regulatory framework. At present, the council includes 29 leading foreign companies and international organizations such as the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB), Deutsche Bank, Arcelor Mittal, HSBC, General Electric, Sberbank, Total, Chevron, Exxon Mobil, and others. Since its inception the council has held 24 meetings, in which a wide range of topics were discussed. The key issues include improving the tax system and tax administration, the modernization of Kazakhstan's economy, Kazakhstan's entry into the World Trade Organization (WTO), progress in improving transparency and fighting corruption, the involvement of foreign investors in the policy of diversification, and technological development in Kazakhstan. In light of the opinions of members of the council, I have given appropriate instructions to the government, which are going to be implemented before the next council meeting. In order to detail the recommendations of the Foreign Investors Council, working groups constantly look at issues of taxation, legislation, the current activities of foreign investors, and the improvement of the investment image of Kazakhstan, as well as the oil and gas sector. Ultimately, much of the council's recommendations are reflected in policy documents that result in concrete results, such as the state program for accelerated industrial-innovative development over the 2010-2014 period, the program to attract investment, the development of special economic zones, and export promotion for the 2010-2014 period. Thanks to this policy to improve the investment climate, the total amount of FDI in Kazakhstan grew from $2.78 billion in 2000 to $19.85 billion in 2011. From only 2008 to 2011, Kazakhstan went from 64th to 47th place in the World Bank's Doing Business report. In the Protecting Investors category, Kazakhstan ranked 10th. In May 2012 the council held the 25th meeting on the theme of “Kazakhstan; an international trade, logistics, business, and financial hub." We are always open to fruitful discussions and the valuable advice of the council members, who will be able to give an additional boost to the economy. Overall, I would like to commend the contribution of the Foreign Investors Council in improving the business and investment climate in Kazakhstan.

During the second summit on nuclear security in Seoul, you mentioned Kazakhstan's plans to build an international bank for low-enriched uranium in cooperation with the International Atomic Energy Agency (IAEA). How important is this project for Kazakhstan and for global security in general?

The international bank for low-enriched uranium under the auspices of the IAEA is to be created on the initiative and financial support of the non-profit Nuclear Threat Initiative, as well as the US, EU, Norway, the UAE, and Kuwait. In 2009, Kazakhstan proposed hosting the bank on its territory and last year submitted a formal application to the IAEA. At present, the project is entering the implementation stage. The bank aims to ensure the effective functioning of the international nuclear fuel market. States that comply with the provisions of the Treaty on the Non-Proliferation of Nuclear Weapons and are developing a national nuclear energy sector should be confident that they will receive nuclear fuel in a guaranteed and predictable manner. The establishment of the nuclear fuel reserve under the auspices of the IAEA is intended to strengthen the international nuclear non-proliferation regime, and demonstrate the consistency and feasibility of international initiatives in this area. Proposing to host a fuel bank in its territory, we hereby reaffirm that Kazakhstan is an active supporter of the non-proliferation regime, and a leader in strengthening global security.

Kazakhstan is a champion of multi-vector diplomacy in its foreign relations. In which direction will the nation's foreign policy develop in the coming years?

Kazakhstan's foreign policy is predetermined by the realities of the world, including features unique to the geographic position of our country. Therefore, our country has taken a worthy place in modern geopolitics, following a multi-level and multi-dimensional foreign policy. We will continue with our balanced foreign policy, interacting not only with the West, but also with Asian countries. Today, regional processes are increasingly setting the global agenda. The nature and dynamics of the integration process will depend on the future of the world. Our foreign policy will remain the same; integration in the region, followed by access to global integration with the global community. We intend to continue to lead in our global initiatives. Today, it is important for the whole world and every state to find answers to powerful global and regional challenges. Thanks to peaceful foreign policy, international initiatives, strict adherence to obligations, and participation in regional and world affairs, we have earned the trust and respect of our foreign partners. Kazakhstan's foreign policy proposals were supported by the international community on both global and regional levels. Our challenge is to implement these proposals, and realize a number of international events of global and regional importance. Kazakhstan will continue to identify ways to strengthen peace and international security, and encourage the disarmament and non-proliferation of weapons of mass destruction. Contributing to the addressing of global and regional economic security, at the 5th Astana Economic Forum, held in May 2012, Kazakhstan presented its idea to create an initiative called G-Global to discuss ways of overcoming the global crisis. We will also strive to implement Kazakhstan's global energy strategy, as well as initiatives such as the Astana "Green Bridge," aimed at the transfer of green technologies. The Fourth Congress of Leaders of World and Traditional Religions, which has become an important platform for international inter-religious dialogue, was held in Astana in May 2012. By holding the congress, Kazakhstan contributed to the union of spiritual and moral potential of religious teachings in resolving international conflicts and combating modern threats. As an active member of the UN and other international and regional organizations, our country is becoming the center of focus for the regional offices of international organizations. In this regard, Kazakhstan is expected to form an international hub for multilateral diplomacy in Almaty. The city also hosts the Secretariat of the Conference on Interaction and Confidence Building Measures in Asia (CICA). This year marks 20 years of my initiative of convening the CICA, which is considered today by the international community as a unique inter-governmental platform for dialogue and consultation, decision-making, and action by consensus on security issues in Asia. The inclusion of the CICA in working groups under the auspices of the UN and the Organization for Security and Cooperation in Europe (OSCE) is evidence of the importance of this forum in the world. Kazakhstan will work on the implementation of multilateral decisions taken during its recently concluded presidency of prestigious organizations such as the OSCE and the Shanghai Cooperation Organization (SCO). Interesting projects are expected to be realized within the Cooperation Council of Turkic Speaking States. In particular, Astana was proclaimed 2012's culture capital of the Turkic world and the CIS. This year, we have to adequately complete the chairmanship of the Organization of Islamic Cooperation (OIC) and the Collective Security Treaty Organization (CSTO). In the future, the implementation of our initiatives, which have received the support of the OIC, will take place. Our country intends to continue its efforts to promote cooperation within the CSTO, and build its capacity in order to ensure peace and stability in the region. Responding to the global challenges of the 21st century, to deepen Eurasian integration, we, along with Russia and Belarus, formed a single economic space, which will proceed to the creation of the Eurasian Economic Union. This is an important step to regional stability overall and improving the competitiveness of our economies. We are ready to support the desire of other CIS states to join this Eurasian integration. Attention will also be given to the implementation of a CIS development concept. This document defines the priority directions of cooperation for the long term and is intended to revitalize the CIS. However, it should be clear that while transitioning into the Eurasian Economic Union, Kazakhstan's foreign policy, as it always has, will continue to develop balanced relations with other countries and regions.

© The Business Year - June 2012