Economic Newsletter on |November 2020

CONTENTS MACRO-ECONOMICS & FINANCE ...... 2 ENERGY & NATURAL RESOURCES ...... 5 TRANSPORT & COMMUNICATIONS ...... 9 AGRICULTURE ...... 11 CONTACTS ...... 15

The Economic Section of the Embassy of the Kingdom of the Netherlands in Kazakhstan intends to distribute this newsletter as widely as possible among Dutch institutions, companies and persons from the Netherlands. The newsletter summarises economic news from various Kazakhstani and foreign publications and aims to provide accurate information. However, the Embassy cannot be held responsible for any mistakes or omissions in the bulletin.

ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan MACRO-ECONOMICS & FINANCE Foreign ministries of Kazakhstan and the Netherlands held political consultations The second edition of bilateral consultations between Kazakhstan and the Netherlands took place on 5 November through a videolink. During the event, a wide range of issues of bilateral cooperation and the international agenda were discussed. The Dutch side highlighted Kazakhstan's contribution in ensuring regional stability and security, including Afghanistan and countering international terrorism and extremism. The parties also discussed mutually beneficial cooperation between Nur-Sultan and The Hague within the framework of the UN, the OSCE and other international organizations, as well as Kazakhstan’s relations with the European Union. Special attention was paid to the outcomes of the official visit of the Prime Minister of Kazakhstan to the Kingdom of the Netherlands in 2019. In particular, parties welcomed the fruitful work on the implementation of joint projects, such as the public-private partnership “Dutch Fruit Solutions for Kazakhstan”. Parties will further strengthen Kazakh-Dutch cooperation across the whole spectrum. The consultations were attended by the Director of the Department of the Ministry of Foreign Affairs of the Netherlands Mrs. Erica Schouten, Ambassador to Kazakhstan Andre Carstens, his Deputy and Head of the Economic Section and relevant departments of the Ministry of Foreign Affairs in the Netherlands. Kazakhstan participated with the Director of the Department of Europe Sultangozhin, Ambassador-at-Large and Special Representative of the for Afghanistan Talgat Kaliyev, diplomats of relevant departments of the Ministry of Foreign Affairs and the Embassy of Kazakhstan in The Hague.

Kazakhstan suffers 12% decline in foreign trade As of September 1, 2020, the total trade turnover of Kazakhstan amounted to 55.6 billion US dollars. At the same time, 29% of export value went to the EU market, 20% to and 18% to China. This means that exports of Kazakh products have decreased by 18.6%, while imports decreased by 6.4%, which hampers economic development of the country. The volume of Kazakhstan’s exports for the first eight months of 2020 amounted to 31.9 billion US dollars. In comparison with the same period in 2019, the indicator decreased by 5.9 billion US dollars. Against the background of restrictive measures imposed around the world, Kazakhstan was forced to reduce by 16.8% the supply of mineral raw materials — a key commodity group that accounts for about 70% of all exports. Kazakh crude oil supplies in absolute terms increased by 12.7%, but in monetary terms, due to the collapse of the oil market, they decreased by 25.9%, reaching 17.1 billion US dollars. Sales of natural gas decreased by 22.2%, while sales of ores and concentrates decreased by 17.3%. In the first eight months of 2020, China imported products from Kazakhstan worth 5.2 billion US dollars. This is 16.3% of the total volume of Kazakhstan’s exports. It is noteworthy that this year China increased the purchase of Kazakh oil by 46% to 1.2 billion US dollars. Thus, hydrocarbons accounted for 22.6% of Kazakhstan’s total exports to China. Supplies of copper and copper alloys also increased by 22.5%, natural gas — by 19.7%, and inorganic chemical products-by 12.1%. Italy purchased Kazakhstani products for 4.6 billion US dollars. At the same time, almost the entire amount concerns domestic oil. Similarly, in the Netherlands, almost the entire volume of imports of Kazakh products is made up of oil and products. The country imported products from Kazakhstan totaling 2.4 billion US dollars. Kazakhstan began to buy 10 times more refrigeration and freezing equipment, 2 times more vacuum and air pumps, and 87% more electrical transformers. However, this growth was offset by a 1% drop in imports of machinery, equipment and vehicles, which account for almost half of total imports. There was also a decline in the

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

import of gasoline by 96.2%, pipes made of ferrous metals -by 38.2%, clothing -by 18%, food and agricultural raw materials -by 8.6%.

State budget of Kazakhstan misses almost 300 billion tenge In January-September of this year, the state budget received revenues in the amount of 10.2 trillion tenge, which is 10.9% more than in the same period of 2019. Over the past 5 years, state budget revenues have been growing by an average of 14.5% on-year. The income plan was fulfilled by only 97.2%, the budget did not receive almost 300 billion tenge. Without taking into account transfers, state budget revenues formed at the level of 6.1 trillion tenge, having decreased by 8% compared to the corresponding period of last year. The growth in state budget revenues is due to an increase in transfers: over 9 months of this year, the receipts of transfers to the state budget reached 4.1 trillion tenge, by 59.7%, or 1.5 trillion tenge, more than in January-September 2019 at 2.6 trillion tenge. Tax revenues to the budget decreased by 10.3% on-year and amounted to 5.8 trillion tenge, against 6.4 trillion tenge a year earlier. Non-tax revenues reached 299.9 billion tenge, meaning an increase of 87.1% on-year. Income from the sale of fixed assets decreased by 13% and amounted to 65.4 billion tenge.

Singapore company can help build satellite city of The Governor of the Almaty Amandyk Batalov shed light on the implementation of a project to create a satellite city of Almaty. According to him: most likely a company from Singapore will be the main constructor. Originally, the feasibility study of the general urban development project was approved in 2016. Later on, the construction of the Western Europe-Western China and Almaty-Ust- Kamenogorsk highway, the Zhetygen-Khorgos railway line, as well as the metro station in Gate City, were included in the feasibility study.

Kazakhstan ranks 62nd in the rule of law index among 126 countries in the world The international World Justice Project periodically publishes a rating of countries on the rule of law index. The study measures the achievements of countries around the world in terms of legal environment based on universal principles. Denmark occupies the first place in the rating. Norway, Finland, Sweden and the Netherlands are also among the TOP 5 countries. The top ten includes Germany, New Zealand, Austria, Canada and Estonia. Kazakhstan, in turn, rose three places and occupies the 62nd place among 126 countries of the world, located between Nepal (61st place) and Panama (63rd place). The index consists of 47 variables that describe in detail the level of development of the legal environment and legislative practice in countries of the world at different levels of social and political development. All variables are grouped into eight benchmarks • * limiting the authority of government institutions; • absence of corruption; * order and security; * protection of fundamental rights; * transparency of government institutions; • observance of laws; * civil justice; • criminal justice. Over the past year, Kazakhstan has significantly improved its performance in the following indicators: * lack of corruption: 57th place, 0.49 points (in 2019 it was 61st, 0.47 points); * civil justice: 40th place, 0.62 points (in 2019 it was 44th, 0.59 points); * criminal justice: 58th place, 0.46 points (in 2019 it was 69th, 0.44 points).

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

At the same time, there is a deterioration in indicators such as limiting the powers of government institutions, transparency of government institutions, and protection of fundamental rights.

Kazakhstan changes taxation of controlled foreign companies Changes to the Tax code that are currently under consideration in the Senate will affect the taxation of controlled foreign companies (CFC): they will increase the number of countries covered by the regulation on such companies, and clarify how they will eliminate double taxation of their profits. A controlled foreign company in domestic legislation is a legal entity registered abroad in which at least 25% of the shares or interests are held by a Kazakhstani individual or legal entity. Another criterion for determining a CFC is the effective corporate income tax rate in the country of incorporation, which must be less than 10%. If a foreign company is registered in a jurisdiction with preferential taxation, that is, in an offshore company, the effective rate cannot be calculated, the company is recognized as a CFC automatically. The Treasury Department maintains a separate list of such jurisdictions, which includes, for example, Hong Kong, Malta, , and Delaware in the United States. Thus, the main changes will affect which companies will fall under the definition of CFC, which countries will be subject to the provisions on CFC, there will be more of them, and how double taxation of CFC profits will be eliminated.

Industries in Kazakhstan experience staff shortages At the end of September 2020, large and medium-sized enterprises in Kazakhstan needed more than 36.700 workers. Most vacancies were found in industry, in particular, manufacturing. Also, in transport, government, retail, healthcare, education, finance and construction.

Specialists leave Kazakhstan in increasing numbers More than 21 thousand Kazakhstanis have emigrated from the country over 9 months of 2020, by data from the National Statistics Bureau. By country In January-September 2020, almost 18.6 thousand Kazakhstanis moved to Russia for permanent residence. Germany at 1,399, the USA at 170, Belarus at 169, at 137, Canada at 88, at 56, Ukraine at 51, Turkey at 35, Israel at 26, Azerbaijan at 20, etc. By specialties Among those who emigrated in January-September 2020, 3,331 people have a technical profession. Economic at 1,714 people, pedagogical at 1,064, medical at 561, legal at 387, architectural and construction at 280, agricultural at 155, and another at 3,955. By education level Over nine months, 5,980 people left while having had higher education (38.3%), 5,468 with professional education (35.1%), and 2,939 with a general secondary education (18.8%). By nationality In January-September, 15,014 Russians, 1,658 Germans, 1,493 Ukrainians, 911 , 559 Tatars, 269 Poles, 254 Belarusians, 136 Koreans, 97 Uzbeks, 74 Azerbaijanis, 63 Chechens, 53 Moldovans, 45 Greeks, 35 Bulgarians and others left Kazakhstan.

Kazakhstan determines holidays in December and on New Year In December, there are two state holidays in Kazakhstan - the Day of the First President of the Republic of Kazakhstan and the Independence Day.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

In December, Kazakhstanis will have 11 days off. Holidays at the beginning of January will be added to them. December 1 (Tuesday) is marked in the country as the Day of the First President. December 16-17 - Independence Day. The day off from December 20 (Sunday) is transferred to December 18 (Friday). Thus, Kazakhstanis will have four days of rest, and Sunday (December 20) will be a working day. December 31, as usual, is not an official day off in Kazakhstan. New Year holidays start on January 1, Friday. And since the holiday of January 2 falls on Saturday, January 4 (Monday) will also be a day off. Kazakhstanis have four days in a row as New Year holidays. January 7 (Thursday) is Orthodox Christmas, another day off in the first month of 2021.

ADB launches first green bonds in Kazakh tenge The Asian Development Bank (ADB) raised nearly 14 billion tenge ($32.56 million) in the first green bonds auctioned and listed November 17 on the Kazakhstan Stock Exchange. BANKING The two-year 10.09 billion tenge (US$23.47 million) and 3.87 billion tenge (US$9.00 million) bonds will pay 10.10 percent and 10.12 percent semi-annual coupons, respectively. Central Asia-based Tengri Partners merchant banking group arranged the bonds, which are denominated and settled in tenge, and sold them to banks and institutional investors in the domestic market. According to ADB Treasurer Pierre Van Peteghem: “Sustainable finance is at the heart of our work in the ADB. By issuing local-currency green bonds, the ADB supports the UN Sustainable Development Goals, mitigates currency risk for our borrowers, and contributes to the development of the Kazakhstan capital market.” Climate change finance is a core development area for the ADB, with $42.5 billion of clean energy investments initiated from 2009 to 2019. The ADB has issued more than $8.2 billion of green bonds in 11 currencies.

ENERGY & NATURAL RESOURCES KazMunayGas reduces volume of oil refining The volume of hydrocarbon processing at the oil refineries of the KazMunayGas (KMG) group decreased by 14.4% to 13.1 million tonnes. KMG notes that the drop in indicators was due to a decrease in refining volumes in Kazakhstan against the backdrop of a pandemic and the shutdown of the Petromidia refinery for scheduled overhaul. The introduction of quarantine measures in Kazakhstan had a significant impact on the production of refineries, due to which the demand for main types of oil products decreased. To avoid overstocking, production volumes were reduced, and the refinery load was balanced in accordance with the required volume of oil products output. As a result, in the first nine months of 2020, KMG's Kazakhstani refining assets reduced hydrocarbon processing by 8.7% to 9.3 million tonnes, and 8.5 million tonnes of oil products were produced. In Romania, at KMG International's Petromidia and Vega plants in Romania, the processing volume amounted to almost 3.8 million tonnes, and the output to about 3.7 million tonnes. This is a quarter lower than the same indicators in 2019. The decrease was caused by the shutdown of the Petromidia refinery for a planned overhaul, which took place from March 15 to May 1. The drop in production at oil refineries is taking place against the backdrop of a ban on imports of gasoline, jet fuel and diesel fuel, which was introduced in Kazakhstan in April 2020 and then extended several times. Now the restriction is valid until November 1. Its introduction was explained by a decline in consumption amid the state of emergency associated with the coronavirus pandemic. Announcing the next extension of the ban in July, the Ministry of Energy said that the level of reserves of petroleum products in the domestic market was at a sufficiently high

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

level, and the receipt of additional volumes of imported fuel could have a negative effect on domestic oil refining. It was a question of a possible decrease in the volume of shipment of oil products from Kazakhstani refineries, overstocking of factory tanks and oil depots in the country, which could lead to a forced reduction in oil refining. Data from the price agency Argus Media also confirms that consumption in Kazakhstan declined from February to April, but demand began to recover in May when quarantine measures began to weaken. Against this background, supplies of oil products abroad increased. Exports should have prevented the overstocking of local oil storage facilities amid weak demand for fuel in the domestic market. During the first six months of 2020, shipments of Kazakh gasoline varied from 18.6 to 83 thousand tonnes per month. Exports peaked in May-June, when fuel shipments reached 70.7-83.1 thousand tonnes per month.

When to expect a recovery in demand for petrochemical products, McKinsey & Company Uncertainty over the price of petroleum products will extend the recovery period for the industry by 2 years. Unfavorable market conditions will lead to further depreciation of petroleum products up to 16% by 2023. Analysts of the McKinsey & Company international strategic management consulting company came to such conclusions in their research. The crisis in the first half of the year affected the financial results of the petrochemical market around the world. McKinsey experts analyzed the reports of large companies in the industry and came to the conclusion that profits in the first half of 2020 for most of them decreased by three percentage points compared to the same period last year. This was the reason for the reduction in operating and capital costs of processing enterprises. According to the authors of the study, the rate of recovery in demand for petrochemical products to levels before COVID-19 will depend on the country's geographic location and the impact of the coronavirus on the epidemiological well-being and macroeconomics. It is assumed that in most countries this will happen no earlier than the first quarter of 2022. A low oil price forecast will flatten the cost-to-profit curves. The margin from the sale of some types of petrochemical products, such as polyethylene, will decrease by $200-300 per tonne. In the countries of the former in April 2020, this figure was less than $500 per tonne, while in China and Latin America it exceeded $800. The gradual recovery scenario, which the study authors consider most likely, shows that the industry average utilization will be around 81% until 2025. Kazakhstan has lost 1.7 trillion tenge income from oil production. The total amount of tax payments to the budget of Kazakhstan over 9 months of 2020 has almost halved.

Oil projects in Kazakhstan are one third more expensive than in Canada The transnational oil and gas concern Shell has included Kazakhstan among the 9 where it plans to focus its oil and gas production in the coming years. The changed oil reality, including low prices for hydrocarbons and shrinking demand for energy resources, forced most players to reconsider their business strategy, leaving secondary projects and selling non-priority assets. Shell was no exception, announcing last week that it plans to focus its future exploration and production operations in 9 core areas and transform its refining capacity into 6 integrated sites as part of its low-carbon business development and cash flow support program. The company will develop its oil and gas business in Brazil, Brunei, the Gulf of Mexico, Kazakhstan, Malaysia, Nigeria, Oman, the Permian Basin and the British sector of the North Sea. Collectively, these areas will generate more than 80% of the company's exploration and production cash flow, according to the company's management. Although this decision inspires optimism after a year ago that Shell was withdrawing from the project to develop the Khazar field in the Kazakh sector of the , it is too

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

early to rejoice. As you know, the reason for leaving the project was called its unprofitability. This is with oil prices in October 2019 in the range of 58-62 dollar per barrel. Today the price is balancing around $40, which means that the situation with the return on investment has only worsened. According to Olivier Lazare, the chairman of Shell in Kazakhstan: “Unfortunately, historically Kazakhstani projects have shown a much higher cost part. This is partly due to technical problems such as sour oil and gas, as well as geographic problems such as climate, and lack of maritime access. However, when compared with a country like Canada, which faces similar problems, in Kazakhstan the cost of equipment and materials is 37% higher and design costs are 30% higher than Canada.” He believes that stakeholders in the oil and gas industry, international oil and gas companies and the government need to move away from the confrontation of recent decades and focus on creating value investment.

Kazakhstan takes 54th place out of 61 in the rating of countries to combat climate change

At the end of September 2020, the installed capacity of renewable energy facilities in the ENVIRONMENT country amounted to 1.5 thousand megawatt (MW), 63.2% more than a year earlier, and 45.6% more than at the beginning of this year. In comparison, at the end of 2019, the installed capacity of renewable energy sources reached 1.1 thousand MW, twice as much as in 2018. Solar power plants account for 58.3% of the installed capacity at 891.6 MW, twice as much as a year earlier. Another 26.5% was occupied by wind power plants at 404.4 MW, 43.5% more than a year earlier; 14.7% by small HPPs at 224.7 MW, plus 10.7% on-year. Bioelectric power plants still account for only 0.5%, or 7.8 MW, although the growth in the segment is just by 3.3 times on-year. In January-September 2020, electricity generation by renewable energy facilities reached 2.4 billion kWh, 44.1% more than last year. The largest production volume fell on solar power plants at 43.9% of Kazakhstan, or 1 billion kilowatt hour (kWh), an increase of 2.4 times per year. Another third fell on wind power plants at 742.2 million kWh; and a quarter for small hydropower plants at 586.2 million kWh. The share of electricity generated by renewable energy facilities in the total volume of electricity production for the first 9 months amounted to 3.1%. For the full year of 2019, the volume of electricity generation was 2.4 billion kWh. In the rating of countries in the fight against climate change, Kazakhstan took 54th place out of 61. The index of the effectiveness in Kazakhstan was 33.39. The ranking included 57 countries, including European countries, a separate assessment was also awarded by the EU as a whole. Moreover, since no country performed well enough in all categories of the index, the first three places remained vacant. Sweden opens the ranking from the fourth place, with an index of 75.77. At the bottom of the ranking with the worst indicators are countries such as Iran on the 57th, Korea on the 58th, Taiwan on the 59th, Saudi Arabia on the 60th, and the United States on the 61st, which received low or very low ratings in almost all categories. The index takes into account 14 indicators in four categories: • Greenhouse gas emissions. • Renewable energy sources. • Energy use. • Climate policy.

Kazakhstan energy sector goes green for 100 billion tenge per year Kazakhstan plans to attract about 107.6 billion tenge for green energy annually. For the entire period of development of renewable energy sources, the value of attracted investments in the sector amounted to 658.06 billion tenge. As a result, the country has 110 operating renewable energy facilities with a total capacity of 1.5 thousand MW. Of

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

these, 26 are wind power plants at 404.4 MW, 42 solar power plants at 891.6 MW, 37 hydroelectric power plants at 224.6 MW, 5 bioelectric power plants at 7.82 MW. In 2021, it is planned to implement 21 renewable energy projects with a capacity of 456.79 MW. The total investment is 196.3 billion tenge. Of the total number of facilities being implemented next year, there are 12 wind farms for 292.2 MW, 4 solar power plants for 120 MW, and 5 small hydroelectric power plants for 44.59 MW. In order to systematically develop the renewable energy market until 2025, it is planned to commission 250 MW each year.

Kazakhstan calculates effect of energy-saving technologies Specialists of the Committee for Industrial Development and Industrial Safety calculated the effect of the introduction of energy-saving technologies in Kazakhstan in 2019, the resulting savings amounted to 28.2 billion tenge. The Institute for the Development of Electric Power Industry and Energy Saving maintains the State Energy Register (SER) of enterprises, it includes state institutions and subjects of the quasi-public sector that consume more than 100 tonnes of standard fuel per year, as well as business entities that consume more than 1,500 tonnes of fuel equivalent per year. At the end of 2019, there were 20,533 of such entities registered in the state register. In 2018, the annual savings received from reducing energy consumption through the introduction of energy-saving measures amounted to 27 billion tenge. Energy efficiency has been improved by 472 SER entities. As a result, the GDP energy intensity indicator in 2018 decreased by 21.6% from the 2008 level. Since 2013, SER entities have attracted 302.2 billion tenge of investments. The GDP energy intensity indicator of 2019 will be assessed by the end of 2020. The total consumption of energy resources by the subjects of the SER in 2019 amounted to 61.1 million tonnes of fuel equivalent. The private sector consumed 59%, the semi- public sector 39% and government institutions 2%.

Kazakhstan’s transition from coal to renewables gets $95.3m boost The Asian Infrastructure Investment Bank (AIIB) is partnering with the Industrial and Commercial Bank of China, the Green Climate Fund (GCF) and the European Bank for Reconstruction and Development (EBRD) to help Kazakhstan reduce its reliance on coal for energy. EBRD is providing $24.8 million in financing whilst AIIB is providing a $34.3 million loan. A $13.3 million loan is being provided by the Industrial and Commercial Bank of China and a $22.9 million loan from GCF. The aid will enable the construction of a 100MW wind farm near the town of Zhanatas in the south of the country. In line with the EBRD’s Green Economy Transition approach, the Zhanatas Wind Project will reduce the country’s annual CO2 emissions by approximately 262,000 tonnes. The project also has a strong inclusive component, promoting employment opportunities in the renewable energy sector amongst young women and men through the development of gender-inclusive training and employment programmes. This is the Bank’s 14th renewable energy project in the country and second one signed under the Bank’s Kazakhstan Renewables Framework II. The original Framework approved in 2016 has been fully utilised in just three years, financing €300 million of renewable energy and grid integration projects. Kazakhstan’s Renewables Framework II builds on its predecessor and earmarks an additional €200 million to advance the green agenda in the country’s power sector.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

Irrigation canals in Kazakhstan to be digitalized Within 5 years, Kazakhstan plans to digitize the main irrigation canals in order to save water resources. This was announced by the Minister of Ecology, Geology and Natural Resources of Kazakhstan Magzum Mirzagaliyev during the government hour on the topic Water security of Kazakhstan: modern challenges and prospects for their solution. This year in the Makhtaral district of the Turkestan region, the first pilot project for the digitalization of the K-19 main canal was implemented, where a 12 km water metering and control system was installed. The launch of the equipment made it possible to detect excessive consumption of irrigation water up to 45% of the irrigation regime.

Kazakhstan to recycle old tires into fuel Production of synthetic fuel for millions of tenge will be established in region. A new project is being implemented in Rudnoye. The city will begin to dispose of used large- sized tires and rubber products, and then use them to get furnace synthetic fuel. The cost is 138 million tenge. The capacity of the enterprise will be more than 2 thousand tons of raw materials processing per year. The full launch of the plant is expected in December this year.

TRANSPORT & COMMUNICATIONS Air Astana to begin operation to Maldives in December Air Astana will begin direct regular flights to the Maldives from Almaty starting 5th December. The airline’s brand new Airbus, A321LR will be used for operation. The airline is to operate two flights a week on Wednesdays and Thursdays. The commencement of flights between Kazakhstan and the Maldives will likely boost the number of tourist arrivals in the Maldives. The Maldives closed its borders to tourists on March 27 as a precautionary measure against COVID-19. The tourism dependent archipelago reopened its borders on July 15, and the number of arrivals have been steadily increasing since then.

Kazakhstan's Kuryk port to launch new ferry operation to Iran Kazakhstan's Kuryk port on the coast of the Caspian Sea plans to launch new ferry lines to Iran's Amirabad and Enzelil. The initial freight will be carried by Russian vessels that can accommodate up to 32 heavy-duty vehicles up to 17 meters long, with a one way cost of freight at 1,600-1,700 U.S. dollars. Located on the eastern coast of the Caspian Sea, the Kuryk port is located at the intersection of the East-West trade corridor linking Europe and East Asia and the North- South corridor linking Russia and India. The port handles 13.9 million tons of goods annually.

Investors in the transport and logistics sector of Kazakhstan revive after last year's recession Investments in fixed assets in the transport and logistics sector increase, after last year's decline by 21.6%, to 766.1 billion tenge. In January-September 2020, the indicator amounted to 814.4 billion tenge, which is 6.3% more than a year earlier. The main sources of financing in the field of transport and warehousing are the businesses' own funds and non-bank borrowed funds. Capital investments at the expense of own funds in January-September 2020 amounted to 264.9 billion tenge, 7.5% less than last year; the amount of borrowed funds increased by 25.7%, to 223.2 billion tenge, of which 181.6 billion tenge were non-resident funds, the value of which more than doubled at once.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

At the expense of the national and local budgets, 172.8 billion tenge, 1.3% more, and 136 billion tenge, 58.6% more, were invested, respectively, and only 17.4 billion tenge came from bank loans, 61.8% less compared to the same period last year. The largest volume of investments in the field of transport and warehousing in January- September of this year occurred in the region at 111.1 billion tenge, 2.5 times more than last year. Next comes the Turkestan region, where the value of investments increased by 3.4 times, to 89.8 billion tenge. Significant values of investments in the sector were also noticed in the region at 79.9 billion tenge, and in the at 77.5 billion tenge.

More and more money of Kazakhstanis moves on the Internet The value of non-cash payments over 9 months of 2020 averaged 2.7 trillion tenge per day. According to the National Bank, the total value for this period reached 535 trillion tenge. Of these, 93% were registered in the systems of interbank transfers and clearing. Since the beginning of 2020, the value of transactions has decreased by 17%, while the number of transactions has increased by 21%. This is due to the slowdown in business activity due to the coronavirus restrictions. In the long-term trend, the growth in the number of transactions also outstrips the growth in the volume of settlements, mainly due to non-cash payments among individuals. Over the past 5 years, the number of transactions increased by 40%, and the value of non-cash payments by 15%.

Kazakhstan telecom market grows 8% in year to date Revenues on the Kazakhstan telecommunications market totaled 726.6 billion tenge in the first ten months of this year, an increase of 8.2 percent compared with the same period in 2019. Internet service revenues jumped by 14 percent to 271.7 billion tenge, and mobile service revenues increased by 1.2 percent to 191.3 billion tenge. Local telephone service dropped by 3.1 percent to 29.7 billion tenge. Internet services accounted for 37.39 percent of all telecommunication revenues, and the mobile segment generated 26.41 percent. Three major telecommunication operators earned 83 percent of all revenues. Fixed telephone subscribers totaled 3.077 million at the end of October, slightly down month-on-month. Mobile subscribers were unchanged at 24.5 million, and almost 16 million of them used mobile internet services, up by 400,000 month-on-month. Fixed internet subscribers grew slightly to almost 2.56 million. The number of companies active in the ICT field grew by 7.9 percent year-on-year to almost 12,500 at the beginning of November. The companies employed 65,600 staff, up by 2.5 percent year-on-year.

Investments in Kazakhstan’s transport and logistics sector on the increase In the ranking of countries on the quality of roads, Kazakhstan took only 93rd place out of 141. The rating assessed the quality of the road surface throughout the country, regardless of how burdened or impacted certain sections of the road are. The maximum rating that can be awarded in the rating is 7.0, the minimum is 1.0. the Average for 2019 was 4.07. the Top 3 countries for the highest road quality included Singapore, the Netherlands and Switzerland. In January–October 2020, 959.5 billion tenge was invested in transport and warehousing 9% more than a year earlier. The real growth of the physical volume of capital investments amounted to 8.4 percent. In a regional context, an increase of investment was registered in the : 119.9 billion tenge, a growth in monetary terms of 2.2 times over the year. The top three also included Turkestan (96.9 billion tenge, 3.4 times more than a year earlier) and Almaty (92.8 billion tenge, plus 39%) regions.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

A little more than a third of investments in transport and warehousing are accounted for by own funds: 327.4 billion tenge, plus 2.2% for the year. Capex from non-bank borrowings amounted to 256.2 billion tenge (26.7% of the portfolio) Another 20% came from the national budget: 192.3 billion tenge, minus 2.8%. Capital expenditures rom the local budget amounted to 164.2 billion tenge (plus 77.5%), from bank loans 19.3 billion tenge (minus 71.6%).

AGRICULTURE Number of sheep and goats in Kazakhstan increases by 15.5% over 9 months Over 9 months of 2020, the number of sheep and goats in Kazakhstan increased by almost 3 million. According to the Statistics Committee of Kazakhstan, as of January 1, 19,092 thousand were kept in farms and as of October 1, their number increased to 22 million, or 15.5%. The largest increasetook place in large sheep-breeding regions. The dynamics of the livestock went on increasing in the first half of the year until the beginning of summer. By February 1, there were more than 19 million sheep and goats, which means an increase of 0.2% against January. In February, the dynamics of growth in the number of sheep and goats increased significantly. From February to March 1, the number of sheep and goats increased by 789.900 to 19,9 million, or 4.1%. But further in March, the increase in livestock became explosive. Over the month by April 1, the number of sheep and goats increased by 2,55 million to 22,463 million, meaning by 12.8%.

Exports of meat and meat products from Kazakhstan decrease In January-August 2020, 17 thousand tonnes of meat and meat products were exported from Kazakhstan for $38.4 million, which is 1.7% less than in the same period in 2019. The decrease in exports is due to a decrease in the supply of lamb by 69.6%, sausages by 62.8%, pasta stuffed with meat by 12.7%. There is an increase in the supply of beef by 122.1%, canned meat by 14.9%, pork by 4.2%. For eight months of 2020, Kazakhstan exported 6.1 thousand tonnes of beef for $20.6 million: to Uzbekistan for $11.4 million, to Russia for $5.1 million and China for $3.9 million. Poultry meat exports amounted to 7.600 tonnes for $10.2 million. The products were mainly delivered to Russia for $5.2 million, and Kyrgyzstan for $3.7 million, to a lesser extent to Uzbekistan to $477.9 thousand, Belarus for $416.2 thousand, and Georgia for $272.2 thousand. Lamb supplies amounted to 68 tonnes for $2.7 million: to the UAE for $1.5 million, Uzbekistan for $681.1 thousand, Russia for $346.1 thousand, and Iran for $112 thousand. Pork exports amounted to 447.5 tonnes for $837.4 thousand, of which to Armenia for $620.2 thousand and Russia for $217.1 thousand. Deliveries of 41.2 tonnes of horse meat were recorded to Russia by $123.5 thousand. Among meat products, Kazakhstan mainly exported canned meat for $1.9 million: to Kyrgyzstan for $892.8 thousand, Russia for $545.5 thousand, and Turkmenistan for $472.7 thousand, and pasta stuffed with meat to Russia for $1.3 million.

Number of camels in Kazakhstan grows by 9% since the beginning of the year Over 9 months of 2020, from January 1 to October 1, the number of camels in Kazakhstan increased by 9%. According to the Statistics Committee of Kazakhstan, the number of camels at the beginning of the year was 214.800, and as of October 1 of this year, 234.100. As a result, over the three quarters of 2020, the number of camels increased by 19.300, or 9%. The number of camels in the context of individual regions increased in 8 regions, and remained at the same level in 6 regions. These are mainly areas with a low number of these animals.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

The number of camels this year increased in the first half during the period of active reproduction of these animals and reached a maximum by the beginning of summer. As of June 1, the livestock amounted to 247.600. During this period, the number of camels increased by 32.800, or 15.3%. From January 1 to June 1, the number of camels grew unevenly during the period. In January, the number of these animals decreased, in February, it increased slightly. We see the greatest reproductive effect in March and April; in May, the rate of increase in livestock decreases. The number of camels over 5 months increased to varying degrees in 10 regions, and in 4 regions it has not changed. Then the number of camels began to gradually decline. In June by 1.200, in July by 9.900, in August by hundred and in September by 2.300. In 3 , the number of camels over 9 months increased by more than 3.500. These are the region by 5.300 from 47.9 to 53.200, the Turkestan region by 3.700 from 30.4 to 34.1 thousand and the by 3.500 from 67.3 to 70.8 thousand. In 2 more regions, the growth of livestock was more than 2.000. In the Almaty region, for 2.200 from 7.4 to 9.6 thousand, and in the region by 2.100 from 32.4 to 34.5 thousand. The largest number of camels are kept in the Mangystau region at 70.800 as of October 1, in the at 53.200, in the at 34.500 and in the Turkestan region at 34.100.

Kazakhstan is badly missing chickens in the fall An outbreak of bird flu that hit Kazakhstan in September has dealt a tangible blow to the poultry population and reduced their numbers in many regions of Kazakhstan. The regions of North Kazakhstan, Akmola, Karaganda and some other regions were particularly affected. The National Reference Centre determined that highly pathogenic avian influenza was the cause of the death. Losses from poultry mortality are difficult to quantify as the loss items include the cost of the poultry itself, lost profits for poultry firms, and the future costs of restoring the livestock. According to the Statistics Committee of Kazakhstan, as of January 1, 2020, 45 million pieces of poultry were kept by enterprises and the population of Kazakhstan, and 9 months later, as of October 1, there were 46 million with an increase of 867.100 or 1.9%. The figures show that, despite the flu, the total population has increased. But the positive picture fades when compared with the dynamics of the previous year. Last year, for the same period from January 1 to October 1, the poultry population increased by 2,9 million from 44,4 to 47,3 million, or by 6.6%. The increase in livestock last year is more than 2 million, or to be exact 2,061.300. Apparently, these are the approximate losses of the industry in full size. The dynamics of the poultry population this year, in individual regions, is completely different, including due to the bird virus. In 8 regions, the poultry population has increased to varying degrees over 9 months, and in 6 regions it has decreased. The lost the most in Kazakhstan at 601.500 from 4 million to 3,4 million. More than 200.000 by the beginning of the year were missing in the at 384.400 from 4,6 million to 4,2 million, in the at 303.900 from 8 million to 7,7 million, in the Atyrau region at 220.000, and this is almost half of the livestock from 455.500 to 235.500, in the Turkestan region at 213.200 from 2,1 million to 1,9 million. The national livestock of poultry was pulled out in plus with an increase of 200.000 mainly due to 4 regions. These are the Almaty region with an increase by 1,4 million from 10,3to 11,7 million, the by 617.100 from 4,2 million to 4,8 million the by 388.700 from 3,8 to 4,2 million and the region by 218.800 from 1,7 to 1,9 million. In other areas, either a slight increase in the poultry population, or a slight decline.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

Billions from Kazakh state budget flow to subsidize foreign agricultural machinery To support agricultural producers of Kazakhstan, the country practices investment subsidies-reimbursement of part of the expenses incurred by agribusiness entities. In particular, the purchase of agricultural machinery, machinery and equipment is subsidized, with a refund of 25% of the cost. Similar measures of state support for agriculture are a global practice, but in Kazakhstan, unlike Russia, Ukraine and others, there is one controversial feature: the state budget in Kazakhstan subsidizes the purchase of agricultural machinery not only for domestic producers, but also for importers. Moreover, Kazakhstan is ready to allocate more funds for imported agricultural products than for domestic ones: the maximum allowable cost for calculating subsidies for a unit of equipment is much higher, in some cases 2-3 times. Higher subsidies are available for imported tractors, combines, reapers, seeders, cultivators, etc. Despite the pandemic and the global crisis, Kazakhstan's agricultural machinery manufacturers continue to work actively. In 10 months, the country produced more combines and tractors than in the whole of last year. In January–October 2020, domestic plants produced 2.700 tractors and combines, 2.2 times more than in the same period a year earlier, and almost 70% more than in the whole of last year. German tractors Bühler are already being produced in Kazakhstan and the production of Claas combines will begin soon. In value terms, the production of agricultural machinery amounted to 78 billion tenge, of which tractors and combines made 72.2 billion tenge, 2.4 times more than a year earlier, and 2.1 times more than for the whole of 2019.

In January-October, Kazakhstan increases agricultural production by 5.2% For the first 10 months of 2020, the gross output of products and services of the agricultural, forestry and fishery industries in Kazakhstan totaled 5.4 trillion tenge, an increase of 5.2% compared with the same period last year. As a reminder, in January-September of 2020 the growth rates was estimated at 5%. In particular, in January-October agricultural products traditionally formed the major volumes of production valued at 5.373 trillion tenge, including plant growing commodities at 3.273 trillion tenge, and animal commodities at 2.088 trillion tenge. The growth in production of agricultural, forestry and fisheries products is mainly due to increasing of the slaughtering volumes of farm animals and poultry in live weight by 3.7%, growth of the production of plant growing commodities by 7.1% as well as increasing of the raw milk yield by 3.1%. Also, in the January-October period, 14 of Kazakhstan reported growth of agricultural production.

Kazakhstan to launch tomato paste plant for 27 million euros A plant for the production of concentrated tomato paste will be built in . The project is estimated at 26.8 million euro. The capacity of the enterprise will be 15 thousand tons per year of products, and tomatoes will be grown on 3 thousand hectares by drip irrigation. The tomato paste production plant is planned to be completed in 2021.

Kazakhstan ranks 48th out of 113 countries in world food security The country's food security index was 67.3 a year earlier, the country was in 57th place: the position of Kazakhstan improved by 9 spots. The food security index is based on 34 unique indicators and takes into account not only the ratio of prices and incomes of citizens, but also the availability of the necessary number of products on the market, their quality and range.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan

The Top 5 countries are Singapore, Ireland, USA, Switzerland and Finland. Compared with the region, Russia has a higher index than Kazakhstan, while Azerbaijan, Uzbekistan and have a lower index. In January-October 2020, the country produced food products worth 1.6 trillion tenge, which is 17.5% more than a year earlier. In real terms, output increased by 3.4%. By region, the largest volume of production in monetary terms occurred in the Almaty (232.6 billion tenge, plus 26.5% in monetary terms for the year) and Kostanay (202 billion tenge, plus 27%) regions, as well as in Almaty (196.5 billion tenge, plus 9.8%). More than half of the total production in the country in monetary terms (54.8%) is provided by three production sectors. 19.3% accounted for the production of flour and cereals and starches: 303.9 billion tenge (plus 35.3% in money for the year). Another 18.9% is generated by the production of dairy products: 296.9 billion tenge (plus 19.7%). Closes the TOP 3 with a share of 16.6%: processing and canning of meat and meat production: 260 billion tenge (plus 17.8%). Prices for food products in October increased by 0.8% for the month and by 10.7% year- on-year. Food itself has risen in price by 10.8% over the year. In particular, prices for eggs (plus 18.8%), fruits and vegetables (plus 13%), bakery products and cereals (plus 12%), oils and fats (plus 12%), fish and seafood (plus 10.9%), meat and meat products (plus 9.5%), dairy products (plus 9.1%), sugar, jam, honey, chocolate, confectionery (plus 9.1%) increased significantly. The largest annual price growth was recorded in , Kyzylorda and Pavlodar regions.

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ECONOMIC NEWSLETTER, November 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan CONTACTS

Embassy of the Kingdom of the Netherlands 62, Kosmonavtov Str. Chubary micro district, 3rd floor 010000 Nur-Sultan (Astana) T: +7 7172 555450 [email protected]

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