MAJOR STRUCTURAL REFORM DEVELOPMENTS
Two new agencies were set up in September 2020 to give a fresh impulse to economic reform.
These are an Agency for Strategic Planning and Reforms and an Agency for the Protection and Development of Competition. The former will include the Committee on Statistics and the Supreme Presidential Council for Reforms, whose decisions will be final. The latter will play a key role in regulating “monopolistic players” and in bringing order to “commodity trading”, particularly in the areas of oil products, electricity and coal.
Privatisation of several key assets has been postponed.
Due to the pandemic and the associated decline in market sentiment, initial public offerings (IPOs) of KazMunaiGas (the national oil and gas company), Air Astana, KazPost and Kazakhstan Temir Zholy (the national railways), initially planned for early 2020, were postponed until 2021-23. Kazatomprom, the national nuclear company of Kazakhstan, was the first “blue chip” to be partially privatised via IPO on the London Stock Exchange and at the Astana International Financial Centre in 2018-19. In June 2020, the authorities sold another 6.3 per cent stake in Kazatomprom, leaving the remaining government stake at 75 per cent. In addition, the government aims to proceed with the sale of KazPost to a strategic investor by the end of 2020.
The government remains committed to longer-term diversification and a renewable energy agenda.
The government is revising its Strategic Development Plan 2025 to address new development challenges and opportunities in the post-Covid-19 world, with a strong emphasis on digitalisation, investing in human capital and diversifying the economy. And although coronavirus risks diverting attention away from climate change mitigation, the authorities are pressing ahead with renewable energy reforms. In April 2020, the government rejected a proposal to introduce local content premia in the renewable energy sector as it contradicts the country’s commitments under the Enhanced Cooperation Agreement with the European Union, World Trade Organization terms and other international agreements. In addition, a new methodology for regulatory asset-based tariffs was approved in May 2020, ensuring gradual repayment of the capital invested, including an estimated return on capital. Furthermore, a green bond was issued by Damu Fund on the Astana International Exchange in August 2020 – the first listing of green bonds in Kazakhstan. This represents an important step towards developing a green economy.
A landmark public-private partnership (PPP) project is set to begin.
In August 2020, the financial closure of Big Almaty Ring Road (BAKAD) marked the conclusion of an eight-year effort to put in place the legal framework for foreign-invested, international-standard PPP projects in Kazakhstan. The largest infrastructure project in Kazakhstan outside the oil and gas sector, BAKAD, involves the construction of a 66 km ring road around Almaty. The project will be implemented by a Turkish-Korean consortium, and financed by the EBRD, Bank of China, PGGM, the Eurasian Development Bank and the Islamic Development Bank. Once completed, it is expected to help remove a major transport bottleneck in Almaty and increase the transit throughput capacity, while reducing local air pollution.
- The economy is contracting in 2020. Real GDP fell by 2.8 per cent year-on-year in the first three quarters of 2020, driven by weak domestic and external demand caused by lower commodity prices, a cut in oil production, as well as Covid-19-related disruption of domestic economic activity.
- The government has put in place a comprehensive anti-crisis package. The list of adopted measures is extensive and includes liquidity support to individuals, firms and the banking sector, and extra spending on healthcare and public works.
- Progress has occurred on longer-term diversification of the economy and the renewable energy reform agenda. The government rejected a proposal to introduce local content premia in the renewable energy sector and, in August 2020, issued a green bond on the Astana International Exchange, representing the first listing of green bonds in Kazakhstan.
- The immediate priority is to continue providing support to sectors affected by Covid-19 disruptions and sustain private sector employment. To help businesses stay afloat, support measures should combine tax/liquidity measures to smoothen income shocks and boost consumption in the hardest hit sectors, such as recreation and hospitality. Measures should be well-targeted to optimize the use of scarce financial resources.
- The authorities should step up efforts to build resilience. The healthcare system’s capacity should be further strengthened with an emphasis on commissioning new hospitals, and increasing supply of medical equipment. To further food security, it is also desirable to improve the organization, and enhance the climate resilience, of the agriculture sector.
- Efforts are needed to improve inclusion across regions and for vulnerable population groups. Reforms in education and vocational education need to accelerate, with a focus on digital skills. The government should take advantage of the opportunities offered by rapid advances in remote working and learning to improve the quality of training and education, and boost job creation in the modern sector of the economy.