A bi-weekly online publication of the Ministry of Foreign Affairs of the Republic of Kazakhstan www.mfa.kz Issue # 155 Friday, 13 May 2011 [PDF]

Almaty’s Development Must Boost, Nazarbayev Urges Gov’t, Citizens

            Despite Astana being the national centre since 1998, the old capital of Almaty remains the largest and most developed city of Kazakhstan, and its value and importance in the overall development of the country remains high and relevant.

Recently, the city hosted the Asian Winter Games where over KZT 40 billion has been allocated to build world-class sports facilities. The important tasks of continued use of the constructions, as well as the overall development of the city were discussed at the special sitting held in Almaty on May 12.

            President Nazarbayev chaired the meeting, which was attended by senior national and city-level officals, including Presidential Chief of Staff, Deputy Prime Minister, Akims of Almaty city and Almaty Oblast, Ministers of Education and Science, Emergencies, Tourism and Sport, as well as the heads of territorial departments of central executive bodies of the Almaty city and regional divisions.

Almaty produces nearly a fifth of the whole country’s gross domestic product and provides a quarter of its revenues to the state budget, Nazarbayev highlighted. Today, the city has all the main elements of infrastructure to meet the standards of a modern metropolis. In terms of gross regional product, Almaty is above any other Central Asian city, as well as some of the major regions of Russia.

The standard of living of citizens continuously grows and today’s GDP per capita makes USD 19,000, the level of South Korea and of Central Europe states. The average monthly wages of the population over the past 10 years have quintupled, while the average life expectancy has tripled, and the birth rate doubled.

“Implementation of the State Programme for Accelerated Industrial and Innovative Development (PAIID) is being actively carried out, under my personal supervision,” President Nazarbayev said at the session. “Thus, the manufacturing of industrial products last year made nearly KZT 370 billion, which is more than in 2009 by a quarter. The growth of the manufacturing sector made over 40 percent, which is very important and can be seen as the evidence that the resources provided show the results,” the President added.

Furthermore, the city accounts for more than a quarter of the whole production of small and medium sized businesses in the country, where the number of employed in this sector has reached over 350,000 people.

More than one million square metres of housing have been commissioned over the past year, President mentioned with approval. Nominal income per capita in February 2011 amounted to KZT 88,000 which is almost 17 percent more than in the corresponding month last year.

Almaty’s Mayor Akhmetzhan Yessimov, in his turn, said the positive trend is observed in all major sectors of the economy. The volume of industrial production in the first quarter of the year grew by 27 percent, investment in fixed capital increased by 21 percent, as well as the volume of housing construction increased by 10 percent compared to the like period of 2010.

            The banking sector, one of the key ones in the city’s economy, is reviving. According to Yessimov, for the first time since the beginning of global financial crisis the amount of loans granted by second-tier banks increased by 41.4 percent in the first quarter of the year and exceeded KZT 600 billion. The inflation rate for the period amounted to 3.5 percent which is 0.2 percent less than the average for the country.

            Over the past two years 749 kilometres of roads, representing 40 percent of the entire road surface, have been repaired and built in Almaty, as well as five power substations which use energy-saving technologies have been opened within the Map of Industrialisation. Overall 68 projects amounting to KZT 172 billion are to be implemented this year.

In total, Mayor Yessimov identified three priority areas of development of the city, taking into account the specifics of the region and its potential opportunities, the first being the development of an industrial area of ​​490 hectares in the city’s less developed north-western sectors. The second is the development of tourism in the Almaty region, and the third is a comprehensive development of the entire city transport system, including the new alternative transport services.

President, in his turn, stressed that Almaty turns into a large transport-logistics centre, where cargo and passenger transportation increases day by day. “As soon as Zhetygen-Khorgos railroad section (significantly cutting distance from the Kazakh-Chinese border) is put into commission and Western China-Western Europe highway is constructed, the traffic flow will increase further,” Nazarbayev emphasised.

            Furthermore, the President urged the necessity of completion of construction of the Eastern bypass road and Big Almaty Ring Road (BAKAD), as well the development of high-speed suburban public transport to nearby towns of Almaty, must also be in spotlight.

            Overall Nazarbayev highlighted several spheres needed to be thoroughly analysed to take the appropriate actions for the development, including a comprehensive plan needed for the development of tourism and the improvement of resort areas, construction of hotels, and camping sites. The city also has to be fully provided with its own food supplies. The President also noted the urgency of the city’s further promotion as the Central Asia’s financial hub. Special attention, surely, has to be paid to the youth, who constitute one third of the population of Almaty. Consequently, the development of small and medium sized enterprises is also among the priorities.

            Furthermore, the President highlighted the necessity to revive the city in terms of it being a traditional capital of apples of Kazakhstan, with the world famous Aporto being cultivated and grown in the area.

“This year is special. It is the 20th anniversary of independence of the nation. Almaty has to be particularly active in celebration of this historic date because this city is the cradle of independence. I ask to pay attention to the most basic problems of citizens of Almaty. These are the main tasks I wanted to put before you today,” President Nursultan Nazarbayev concluded.

Kazakhstan Human Rights Commission Highlights Improvements in the Field

            The human rights situation in Kazakhstan saw improvements in 2010 in comparison with 2009. Tastemir Abishev, the Secretary of Kazakhstan’s Presidential Commission for Human Rights, made this announcement on May 11, as the body presented its draft annual report “On human rights situation in Kazakhstan in 2010,” which covers in detail almost all aspects of the state of human rights in the country.

“Compared with 2009, in 2010 the observance of all human rights: economic, cultural, political and civil, improved. There are certain accomplishments,” Abishev is quoted to have said by the Novosti-Kazakhstan news agency.

According to the senior official, “the report notes a number of achievements in promoting and protecting human rights all across Kazakhstan.”

“The observance and enforcement of rights of Kazakhstan’s ethnic minorities can serve as a model for participating states of the UN, the OSCE, and the OIC,” Abishev said. “On ensuring the rights of women and children and education our achievements can serve as a model for states parties to the OIC. Many states are now turning to the Human Rights Commission with request to share our experiences in this field,” he added.

According to Abishev, the draft report covers a detailed analysis of the observance of women’s rights at the level of generally accepted international standards.

He said that the report contains a number of suggestions on some problematic issues. “They concern the observance of human rights during the preliminary investigation and inquest, the use of torture by some law enforcement officials, the ways to prevent them, as well as securing the constitutional rights of citizens to obtain information.”

“We recommend accelerating the adoption of a specific law on access to public information,” Abishev stated.

In general, the draft report is full of facts about work on human rights, gives an idea of the national legislation in this area, and compares it with international legal acts.

The document is based on data submitted by numerous government agencies, NGOs, including international human rights organisations. It also includes the results of special studies conducted by the Human Rights Commission and its Secretariat.

After some refinement, the draft report will be forwarded to the Head of State Nursultan Nazarbayev.

ADB Provides Financing to Support Kazakhstan’s SMEs

Kazakhstan’s Prime Minister Karim Massimov, after meeting with Vice President of Asian Development Bank Xiaoyu Zhao on May 12 in Astana, announced that the next annual meeting of the ADB will take place in the Kazakh capital in 2014. Also on the same day, a Framework Agreement on financing of US$ 500 million (KZT 146 = US$ 1) to support the country’s small and medium sized enterprises (SMEs) was signed by Kazakhstan’s Minister of Economic Development and Trade Kairat Kelimbetov, Chairwoman of the Board of Damu Fund Lyazzat Ibragimova and ADB VP Xiaoyu Zhao.

According to the Ministry of Economic Development and Trade, the Agreement involves multi-tranche financing of an investment programme to support SMEs, designed to assist the nation in diversifying economy and creating jobs trough the development of the SMB sector.

The initiative of raising the funds for the SMB sector was started by the Ministry of Economic Development and Trade in spring of 2010. The financial support recruited by the efforts is the largest the Asian Development Bank (ADB) has ever invested in the SMEs sector of economy.

“The Asian Development Bank is our nation’s strategic partner in the development of key economic sectors. Of particularly importance for us is the cooperation with ADB during the post-crisis period,” Kelimbetov said. “Furthermore, this is the first loan by international financial institutions issued in local currency of the borrower, as well as the first major nongovernmental loan attracted by financial institutions of Kazakhstan since the financial crisis, and which will serve as a positive signal for foreign investors,” Minister highlighted.

According to the programme, Damu Fund will receive funding from the ADB in several tranches, where the first tranche of US$ 150 million is planned already this month. The loan will be medium-long (for five years) at a fixed rate of tenge under the state guarantee for further crediting of Kazakhstan’s banks participating in the programme. A prior-to-investment research Due Diligence of the second-tier banks of Kazakhstan has been undertaken by the ADB, as a result of which the bank-partners selected for the project are Kazkommertsbank, Bank CenterCredit and Alliance Bank. This opportunity will help the banks gain access to funds they need for lending to SMEs.

In accordance with the ADB policy, loans to the SMEs will be provided at market conditions, where the current rate for lending to SMEs is 14 percent per annum, and the programme’s administrators expect the rate for the final borrowers to stay at this level.

The ADB loans are to be implemented in all regions of the country, where at least 40 percent of all the loans must be placed outside of the cities of Almaty and Astana. There are no restrictions or limitations for any types of sectors of the economy. The priority, however, is to be given to borrowers engaged in activities prioritised by the State Programme Business Road Map 2020 approved by the Government in mid-April of 2010.

The ADB is a multilateral development bank operating in Asia and the Pacific region. The bank was established in 1966 under a binding agreement between the member countries which are its shareholders. According to the Bank, as of 31 December 2010 there are 67 members, 48 of which have been drawn from the region and 19 from other parts of the world, where Kazakhstan is the 14^th largest shareholder among regional members and the 21^st largest overall.

Since joining the ADB in 1994, Kazakhstan has received US$ 2.14 billion in public sector loan commitments, making it ADB’s 12^th largest borrower. Loan commitments cover 18 loans in the areas of agriculture and natural resources, education, finance, transport and communications, water supply, sanitation, and irrigation. Furthermore, according to ADB, Kazakhstan is also one of the bank’s top 10 countries for non-sovereign operations.

Since 2006, ADB has been a member of the Kazakhstan Foreign Investors Council, and ADB’s Vice-President, Private Sector and Co-financing Operations, represents the bank at semiannual plenary sessions chaired by President Nursultan Nazarbayev.

New Savings System to Help Poorer Citizens in Securing Higher Educaton

The Kazakh government is introducing the internationally successful system of educational savings for parents to help fund their children’s tuition fees when they grow up. The nation’s Ministry of Education and Science has elaborated the large-scale programme to help the government tackle the difficulties faced by poorer categories of citizens in paying for the higher education for their children. Minister Bakytzhan Zhumagulov explained the system’s mechanisms in his extensive interview with the Liter national daily on May 11.

The topic of introduction of funded education aroused active discussions in society. The most heated debate revolved around rumours that the new system would entail abolishment of quite generous education grants now available. Zhumagulov denounced them and clarified the situation in the interview.

“No one is going to cancel grants. On the contrary, their number is growing every year. Over the past seven years, the number of state grants for undergraduate degrees increased by 5,000. This year, there will be more than 36,000 of them. The number of grants for pursuing graduate degrees during the same period doubled (from 2,550 to 5,000), and those for postgraduate studies quintupled (up to 500). This trend will continue in the future,” the Minister said. He added that the rights of Kazakhstan citizens to receive free higher education on a competitive basis are secured by the Constitution and will not be affected by the proposed system.

The new system is designed specifically for parents, who by putting away some money from the child’s birth will be able to cover their children’s university costs if they do not win grants.

“I want to note that in this matter we are not inventing the wheel. For example, a system of savings for education works in the United States from the 1980s. It is well established there. Over nine million families have accumulated more than US$ 100 billion there,” Zhumagulov said.

Sociological surveys have shown that the majority of polled citizens reacted positively to the proposal, Zhumagulov said. These included 77 percent of school students, 60 percent of university students, 74 percent of parents with children of preschool and school age, and 67 percent of family members and relatives who may save funds for future students.

The mechanism of the new system is designed with the account of wishes and comments of the respondents. Every parent will be able to open an educational deposit at commercial banks with the possibility of obtaining state premiums and bank awards, accrued annually at a rate not less than 12 percent of the amount of savings.

The difference of educational savings deposits from others is that, in addition to bank awards, they will receive state premiums in the amount of 5-7 percent per annum, depending on the contributor’s social status, but not more than 50 monthly calculation index (MCI, currently equals KZT 1,512 = US$ 10.5), according to the Minister. At the same time, state premiums will be accrued not on the amount accumulated during the year, but on the amount accumulated over the all previous years.

“These terms of the state funded education system would give substantial financial support to the population. Bank awards and state premiums combined will constitute from 20 to 50 percent of the total amount of accumulated funds, depending on the duration of accumulation, by the time a child enters a university. Educational savings deposits of citizens will be subject to mandatory individual deposit guarantee; in other words, their safety will be guaranteed by the state,” Zhumagulov stressed.

The Minister further explained some of the requirements for opening and maintaining educational savings deposits.

First, restrictions on the size of contributions will only be for an initial fee. The conditions concerning the initial payment were determined by taking into account people's ability in accordance with administrative and territorial principle (differences between urban/rural areas). “We propose the following differentiation for the initial one-time fee for opening deposit: four MCI for Almaty and Astana, three MCI for regional centres, two MCI for district centres,” Zhumagulov said.

“Second, the size of the next regular contributions will be determined by the citizens themselves, depending on the duration of the accumulation, the amount necessary to accumulate by the end of the period of accumulation, as well as financial capabilities. Also, the account holders will have the right to determine the frequency of contributions,” the Minister explained.

Another important feature of the new system is that it takes into account the possible risks associated, especially, with the growth of inflation and education costs. According to preliminary calculations, bank awards will be in the amount of 8-9 percent per annum, while state premiums will include 5 percent per annum for all categories of citizens and 7 percent per annum on deposits created for children from socially vulnerable groups.

“Given the current level of inflation and its projected value of 6-8 percent for the next three years, the growth rates of citizens' savings will be much higher. The state will review the level of state premiums every three years in order to eliminate the possibility of the inflation rate exceeding the growth rate of savings,” Zhumagulov said.

In conclusion, the Minister explained what would happen to the savings if a student wins an educational grant. In this case, the accumulated funds, taking into account the state premiums, can be directed to an educational savings deposit opened for another child in the family or used to pay for other levels of education, including post-graduate degrees. If after payment for education there is some money left in the deposit, the investor can withdraw the money, including the state premiums.

Also in the News:

• A sitting of Kazakhstan’s Presidential Commission for the Bolashak Scholarship, chaired by Secretary of State Kanat Saudabayev, excluded undergraduate studies from the programme’s scope. At the same time, graduate, postgraduate and internship programmes in the world’s leading universities under the Bolashak programme, according to Saudabayev, will grow significantly.
• Kazakhstan’s Deputy Foreign Minister Konstantin Zhigalov met with NATO Secretary General’s Special Representative for the Caucasus and Central Asia James Appathurai in Astana on May 12. The sides discussed the status and perspectives of cooperation between Kazakhstan and NATO. Apparthurai is in Kazakhstan to discuss preparation of the third Individual Partnership Action Plan between the two sides for 2012-13, the situation in Afghanistan, the NATO support to Kazakhstan in defense education and overall development of Kazakh Military.
• On May 12, Personal Representative of the OSCE Chairperson in Office on Combating Intolerance and Discrimination, Kazakh Senator Adil Akhmetov discussed issues of religious freedom and preventing discrimination, xenophobia and racism, during a three day joint visit of three Personal Representatives of the OSCE Chairman in Office to Italy and Vatican. The OSCE delegation held meetings with representatives of Muslim society in Italy, governmental officials, and NGOs.
• According to Renaissance Capital, Kazakhstan and Romania will be the most-attractive emerging markets for investment in the next four years as their economies grow, Bloomberg news agency reported on May 11. Kazakhstan has a low debt-to-gross domestic product ratio and may see strong output growth between 2012 and 2015, Bloomberg cited Renaissance’s Global Chief Economist Charles Robertson. Renaissance Capital is an independent investment bank operating in Russia, the CIS, Central and Eastern Europe, Africa, Asia and other high-opportunity emerging and frontier markets. The firm is an advisor to governments, corporate and institutional clients.
• The average income per capita in March 2011 rose by 21.1 percent in annual terms, Kazakhstan’s Statistics Agency reported on May 12. According to the agency, the real incomes grew by 11.5 percent. The ratio between maximum and minimum sizes ​​of nominal incomes across regions is 4.1 times, compared to exactly fourfold in March of 2010.
• The shadow economy in Kazakhstan is estimated at KZT 250 billion (KZT 146 = US$ 1), Chairman of the Tax Committee of the Ministry of Finance Daulet Yergozhin said on May 13. According to him, the amount of money that is illegally removed or drawn into the economy each year is decreasing, while more taxpayers get registered. Internationally agreements on joint tackling of economic crimes have been reached with Russian and Lithuanian authorities and the Italian Financial Guard among others. Yergozhin also added that the tax burden on non-oil sector in Kazakhstan decreased from 20.9 percent to 12 percent from 2005 to 2010. The overall tax burden in the economy during the time remained approximately at the same level. While taxes in non-oil sector continued to decrease, the tax burden in the oil sector of the economy, in contrast, was increasing.
• According to preliminary, unaudited data, net income of JSC KazMunaiGas (Kazakhstan’s national oil and gas company) in Q1 2011 increased by 78 percent compared to the like period of 2010 and amounted to KZT 118 billion, the company announced on May 11. Consolidated revenue for Q 1 2011 amounted to KZT 621 billion or 18 percent more compared to the same period last year. The company’s payments to national budget made over KZT 111 billion which is nine percent more than in January-March of 2010.
• JSC KazMunaiGas Exploration and Production (KMG EP) has announced its withdrawal from the negotiation process on the Akkas Field Development project in Iraq, the company’s press release said on May 11. According to the data, in October 2010 KMG EP together with Korea Gas Corporation (KOGAS) won a tender for development of Iraq’s Akkas gas field. However, due to failure to resolve all the emerged issues it became impossible to develop a consensus document that would fully meet the interests of all parties, the press release reads. Nonetheless, KMG EP stressed that it still considers Iraq as a promising area for investment.
• A programme to support start-up projects will be launched in Kazakhstan by the end of 2011, KazTag news agency refers to press service of Damu Fund. The programme also includes grants for starting a business and provision of state funds to the starting companies. According to the data, the total budget of the Business Road Map 2011, including left-over funds from 2010, makes KZT 30 billion.
• 7^th Pan-European Conference of Environment Ministers and discussions on the Astana’s Green Bridge initiative will take place in Astana this autumn, Chairman of the Ecology and Nature Management Committee of the Kazakh Majlis Yerlan Nigmatulin said at the 19^th Session of the UN Commission on Sustainable Development in New York on May 12.
• National budget expenditures for education amount to almost KZT 900 billion and make 4.2 percent of the country’s GDP in 2011, Minister of Education and Science of Kazakhstan Bakhytzhan Zhumagulov said at the First Congress of Kazakhstan’s Mathematics Teachers held in Astana on May 11. According to the Minister, Kazakhstan gets closer to the standards set by the UNESCO which make 5-6 percent of the GDP of a country. In accordance with the UNESCO Education for All Development Index, Kazakhstan has been one of the top four among 129 countries for the past three years.
• Almost 1.7 million children received immunisation against poliomyelitis in all regions of Kazakhstan between May 3 and 7. The immunisation was held in accordance with the recommendations of the World Health Organisation (WHO) while the vaccine, certified by the WHO, has been delivered to Kazakhstan at the expense of the United Nations Children’s Fund (UNICEF). The above figure makes 98.1 percent of the total number of children needed to be vaccinated.
• For the first time in Kazakhstan, an artificial heart ventricle has been implanted to a patient, press service of the Ministry of Health reported on May 13. According to the data, the surgery has been performed in the JSC National Research Medical Center.

Things to Watch:

• Foreign Ministers Council of the Shanghai Cooperation Organization will take place in Almaty on May 14.
• Minister of Foreign Affairs of Russia Sergey Lavrov is on an official visit to Kazakhstan on May 13-14. During the visit, meetings with President Nursultan Nazarbayev and Foreign Minister Yerzhan Kazykhanov are scheduled. A wide range of issues including the current state and prospects of relations and cooperation in various spheres is to be discussed, and a Joint Communiqué is planned to be signed after the talks of the two foreign ministers.
• The 27^th session of the Customs Union Commission to discuss the issues related to customs services will be held in Moscow on May 16. During the meeting, signing of agreements on cooperation, mutual assistance, and operation of representative offices of customs services of the Customs Union is expected to take place.
• With the assistance of the Embassy of Kazakhstan in England, the Zhurgenov Kazakh National Academy of Arts for the first time will organise a demonstration of student diploma projects at the London’s Arts Theatre. A performance of William Shakespeare’s Macbeth will be held at the Greenwood Theatre, London, at 18.00 on May 14.
• On May 18, a cultural festival called “Night at the Museum” to mark the International Museum Day will be hosted by the “Atameken (Homeland): Mini-Kazakhstan Map” memorial complex in Astana. Kazakh museum specialists will gather to discuss their mission and meet their foreign colleagues both in person and online. Museums around Kazakhstan will be opened all night long on this date.

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