THE SPIID OF DEVELOPMENT

Kazakhstan 2017 | INDUSTRY | FOCUS: INDUSTRIAL DEVELOPMENT

In 2014 Kazakhstan launched a five-year industrial development plan with the purpose of fostering growth of the industrial, mining, and manufacturing sectors. These areas, among others, were identified as being key to achieving the country's long-term vision of economic diversification.

SPAIID seems to resemble an acronym that rapidly developing countries conceive of to convey in synthesis the potential of their economies. However, the State Program of Accelerated Industrial and Innovative Development (SPAIID) was, in fact, a formidable instrument of economic programming set down by the Kazakhstani Republic for 2010-2014. In 2014, the government launched the State Program of Industrial-Innovative Development (SPIID) for 2015-2019, a follow-up program for the initiative for the following four years. In all truth, however, Kazakhstan's programs for the future go far beyond 2019. The government's slogan “Kazakhstan's way-2050: One goal, One Interest and One Future" amply expresses this.

The country's economic performance in the last decades, as a result of its vast oil reserves and mineral deposits, has awarded it a coveted spot in many of the world's political and economic organizations. The economic and financial crisis of the past decade, however, has slowed down its development and, similar to other oil-producing countries, Kazakhstan has had to enact long-ranging economic policies aimed at diversifying productive activity. SPIID, announced in a presidential decree on August 1, 2014 and implemented in subsequent legislative measures, was designed with the ultimate goal of encouraging diversification and enhancing the competitiveness of the manufacturing industry. This was necessary in order to breathe new life into the country's industrial development. The objectives of the multi-year plan include accelerating manufacturing production, increasing exports of non-commodities, increasing non-natural resources, attracting foreign investments through fiscal incentives, increasing competitiveness in basic economic sectors, reducing state ownership in SMEs, improving productive efficiency, increasing and improving the quality of human resources, and enhancing the involvement of citizens in carrying out reforms.

Albert Rau, Former First Vice Minister for Investment and Development, had noted to TBY: “We have been modernizing industry in the country as per our overall goals, and that started back in 2010. Our economy has begun diversifying since then and focusing more on the processing and manufacturing industry. Our main priority has been to attract more foreign investment into the processing industry."

As far as modernization and efficiency in production processes go, in addition to the manufacturing of industrial machinery, the program foresees a net increase in new technology that is intended to significantly boost the quality and quantity of the country's industrialization. As a result of the program's implementation, Kazakhstan expects to achieve by 2019 some ambitious game changers within its economic diversification, including a 43% increase in the volume of manufactured goods, an increase in the labor productivity of the manufacturing industry by 1.4 times, an increase in employment in the industry by 29,000 people, and exports of non-primary—namely processed—goods by 1.1 times.

Halfway through the program's lifespan, a number of important industry-fostering initiatives within the program's framework have been launched, particularly those subsidized by the Development Bank of Kazakhstan. These include, for instance, the construction of a sodium cyanide plant and the financing of its exports to Russia, and a new hydro plant with a capacity of 24.9MW. Furthermore, under the program, the Zhambyl region has already invested in 35 investment projects and plans to invest KZT15 billion in additional ones for the production of goods such as meat, pasta, and salt and the processing of granite.

The outcomes of this program, like others, are currently uncertain: the government's forecasts for the economy in general and industrialization in particular are to be considered utterly disappointing for 2016. However, the main reasons for the economic slowdown are the considerable drop in commodity prices, a prolonged recession in key trading partner Russia, and a sharp devaluation of the local currency. The first two months of 2017, however, have shown a strong recovery in industrial production, especially in the mining and manufacturing industries. In particular, industrial production went up 4% YoY, mining and quarrying grew at a slower 2.3%, while manufacturing increased by 6.5% YoY.

These figures indicate there is a bright future ahead for Kazakhstan's economic diversification, and that SPIID is a key initiative and powerful tool with the potential to radically transform Kazakhstan's industrial economy.