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Home , Economy of Kazakhstan, Kazakhstani tenge, West Kazakhstan Region

Economic Newsletter on |June 2020

CONTENTS MACRO-ECONOMICS & FINANCE ...... 2 ENERGY & NATURAL RESOURCES ...... 5 TRANSPORT & COMMUNICATIONS...... 9 AGRICULTURE ...... 10 CONTACTS ...... 13

The Economic Section of the Embassy of the Kingdom of the 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, June 2020 Embassy of the Kingdom of the Netherlands MACRO-ECONOMICS & FINANCE Kazakhstan’s national budget receives almost 25% less taxes The state budget of Kazakhstan began to receive less income, including tax revenues. Over 5 months of 2020, the state budget income of Kazakhstan amounted to more than 3.4 trillion tenge, which is 10% less than in 5 months of 2019. This is evidenced by the data of the State Revenue Committee. Tax revenues of the state budget for the reporting period decreased by 9.7% to 3.3 trillion tenge. The value includes income tax of 1.2 trillion tenge and domestic taxes on goods and services of 1.3 trillion tenge. By , the most taxes to the state budget came from at 884.9 billion tenge, Atyrau at 537.7 billion tenge, Nur-Sultan at 406.4 billion tenge, at 197.5 billion tenge, Karaganda at 142, 8 billion tenge. In January-May 2020, the tax revenues to the national budget amounted to more than 2 trillion tenge and decreased by 24.5% compared to the same period in 2019. Local budgets in turn received more than 1.26 trillion tenge of taxes over five months. Value increased by 32.7% compared with the five months of 2019. As for receipts to the National Fund, in January-April 2020 they exceeded 1 trillion tenge, decreasing by 28.7% compared to the same period in 2019, LS reported.

International Monetary Fund downgrades forecast for Kazakhstan’s GDP for 2020 The International Monetary Fund downgraded Kazakhstan’s GDP forecast in 2020 by 2.7%. According to the forecast published in the June IMF report, the real GDP of Kazakhstan will decrease in 2020 by 2.7%. However, already in 2021 an increase of 3% is expected. A month earlier, the country’s GDP was expected to decline by 2.5% this year, and growth next year to 4.1%. According to the forecast, the global economy will shrink this year by 4.9%, against 3% previously forecasted. In 2021, the increase will be only 5.4%, and not 5.8% as previously expected. “Compared to the April issue of World Economic Outlook, we now forecast a deeper decline in 2020 and a slower recovery in 2021. Worldwide production is projected to decline by 4.9% in 2020. These expectations imply aggregate losses for the world economy as a result of the crisis in the amount of over $12 trillion in two years, 2020– 2021. This crisis is different from all others, and the recovery from it will not be like anything else,” the IMF report said. Earlier, the Asian Development Bank revised the outlook for Kazakhstan’s economy in a negative direction. The Minister of National Economy Ruslan Dalenov said that amid worsening economic conditions in 2020, Kazakhstan’s GDP is expected to decline by 0.9%, LS reported.

Asian Development Bank predicts negative economic growth in Kazakhstan The Asian Development Bank has revised its forecast for Kazakhstan’s economic growth in a negative direction. In April, the financial institute expected that the country's GDP growth in 2020 would decline to 1.8%, and in 2021 it would be 3.6%. “The forecast for the growth of the Central Asian economy was adjusted to minus 0.5%, which is lower than the April forecast for growth of 2.8% due to trade failures and low oil prices. A recovery to 4.2% is forecasted in 2021. Expectations growth for 2020 for Kazakhstan was revised downward from 1.8% to minus 1.2%, for 2021 from 3.6% to 3.4%. The forecast in Kazakhstan was also adjusted from 6% to 7.9% for 2020 and from 5.7% to 6.2% for 2021,” the ADB said. In addition, inflation in developing countries in , according to the expectations of bank analysts, this year will be at the level of 2.9% against 3.2% previously, which reflects a decrease in demand and lower oil prices. In 2021, it will decrease to 2.4%.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands

According to forecasts, Kazakhstan’s GDP due to a pandemic in 2020 will decrease by 3%. Also, the financial institute calculated that the number of impoverished Kazakhstanis after a pandemic could increase by 820 thousand. The Minister of National Economy, Ruslan Dalenov, said that amid worsening economic conditions in 2020, Kazakhstan’s GDP is expected to decline by 0.9%. KMF receives a loan from the European Bank for Reconstruction and Development in the amount of $40 million Kazakhstan’s leading microfinance organisation, KMF microfinance organisation will be able to meet the urgent need of micro, small and medium-sized enterprises for liquidity due to the impact of the coronavirus pandemic, thanks to a local loan provided by the European Bank for Reconstruction and Development. A loan in , equivalent to $40 million, will help local enterprises continue their entrepreneurial activities and preserve jobs. The provision of funds in local currency will reduce the currency risks of borrowers. “Now we are witnessing an active recovery in the business of our customers. We note the high demand for this funding and are grateful to the EBRD for its active work in attracting investments to Kazakhstan that work to increase entrepreneurial activity, including among self-employed citizens,” Shalkar Zhusupov, Chairman of the Board of KMF, said. KMF has 14 branches and 111 branches throughout Kazakhstan and provides financial services to more than 225,000 customers across the country. The company has been a partner of the EBRD since 2005. To date, the EBRD has invested 8.5 billion in the through 273 projects, Kapital reported.

Kazakhstan, EAEU trade turnover reaches $5.6 billion In January-April 2020, mutual trade between Kazakhstan and the EAEU countries amounted to $5.685 billion, the Statistics Committee of the National Economy Ministry reports. This amount is 9.3% less than in January-April 2019, including export – $1.606 billion (decreased by 16.5%), import – $4.079 billion (decreased by 6.1%). Trade turnover with accounts for 92.6% of all Kazakhstan’s trade volume with the EAEU states, Kyrgyzstan – 3.9%, - 3.4% and - 0.1%, according to Inform.kz.

Kazakhstan mulls investment tax credit An investment tax credit is proposed to be introduced in Kazakhstan, National Economy Minister Ruslan Dalenov told the plenary session of the Majilis. According to Dalenov, if introduced, an investment tax credit will be provided for three years. Such credits will be interest-free, but penalties are considered to be levied on overdue credits. The minister went on to say that regulations to lower the amount of value added tax had been offered to apply for cotton processing, production of yeast, confectionery products, sugar (produced from sugar beets) in order to boost production volume and agricultural processing. Local exporters will enjoy a simplified VAT refund, that is, 50% without inspection, 50% after inspection, the minister said. VAT exemptions are also to be received by manufacturers of vehicles and agricultural machinery so as to increase Kazakhstani content, according to Kazinform.

Kazakhstan to revise Strategic Development Plan for 2025 The Kazakh government will update the Strategic Development Plan For 2025. The new document will incorporate a mechanism called the “institute of regulatory appeal.” This mechanism will allow entrepreneurs and business associations to cancel or suspend the decisions of central and local governmental bodies by filing a complaint. The Minister of National Economy Ruslan Dalenov announced this new pro-business measure during the June 23rd government meeting.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands

“That is, decisions that interfere with business activity can be quickly reversed and corrected,” he said. The new agenda will reduce control and supervision. It will substitute scheduled inspections with enterprise diagnostics. According to the minister, the business diagnostics will be done “without liability and will reduce the number of scheduled inspections.” The government “will continue to improve financial measures for state support. The point of interaction with the opinion leaders of small and medium-sized enterprises (SMEs) will be strengthened,” Dalenov said. The government will also minimize requirements for licenses and permits to simplify market entry for new competitors. Businesses will be able to get all the state services they need virtually. The ministry estimates that the new plan will increase the share of SMEs from 30.8% in 2019 to 35% by 2025. These measures should set a new economic course for the country and ensure sustainable development for entrepreneurship, he said. Kazakhstan achieved the highest economic growth in the last six years following the results of 2019, while 85% of the growth was from non-oil sectors, said Kazakh Prime Minister Askar Mamin at the June 22 joint parliamentary meeting. Investments in fixed assets increased 8.5%, including private investment which reached 9.5%. Foreign trade turnover reached $97 billion, Astana Times reported.

National Bank moved to Kazakh capital

The National Bank of the Republic of Kazakhstan has moved to the capital, according to the press service of the National Bank. “In accordance with President Tokayev’s order No. BANKING 304 of April 10, 2020, the National Bank of Kazakhstan was redeployed before July 1, 2020” the NBK noted. The National Bank’s new legal address is: Nur-Sultan, st. Mangilik El, 57A. A permanent representative office of the National Bank was opened in the financial center of Kazakhstan Almaty, 67 Aiteke bi street, headed by the NBK deputy governor, Dina Galieva. “The representative office of the NBK will continue close cooperation with the Agency of the Republic of Kazakhstan on regulation and development of the financial market, the Association of financiers of Kazakhstan, financial market entities and international financial institutions,” the press service added, Kazakhstanskaya Pravda reported.

50 billion tenge cashed in by the National Fund of Kazakhstan Kazakhstan’s National Fund Samruk-Kazyna received 50 billion tenge in proceeds from the sale of shares on Kazatomprom’s SPO. The remaining 50 billion tenge will be sent to the fund before the end of this year. On June 3, 2020, at a meeting of the Fund Management Council, it was announced that the holding was ready to send 100 billion tenge to the National Fund by the end of this year. Elbasy supported this initiative, emphasizing its special value in times of crisis. “I positively assess and support timely decisions of the fund’s management. They have shown their effectiveness. In the crisis, the state allocated substantial funds from the National Fund to support the economy. However, under these conditions, Samruk- Kazyna, on the contrary, will send 100 billion tenge to the fund,” he said. The leadership of Samruk-Kazyna, given the current economic situation in the country, decided to send the first part of the funds to the National Fund ahead of schedule. The remaining amount is planned to be sent before the end of this year. In early June 2020, Samruk-Kazyna completed the process of additional placement of shares and Kazatomprom global depositary receipts, using the favourable demand for previously placed shares of the company. According to the results of placements on the London Stock Exchange and AIFC, the demand for shares from investors exceeded the

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offer by 2.9 times. 6.28% of the company's shares were sold for $211 million, or 85 billion tenge. A total of $69.7 million applications were received at the AIFC exchange site, including 53.4% from Kazakhstani and 46.6% from foreign investors.

ENERGY & NATURAL RESOURCES In 2nd half of 2020, Kazakhstan to continue to reduce oil production The Government of the Republic of Kazakhstan adopted a Decree on Introducing Temporary Restrictions on the Use of Subsoil Sites for Medium, Large and Gigantic Fields Proportionally to Export Volumes. The adopted approach allows to meet the needs of the domestic market of the Republic of Kazakhstan in the necessary volumes of oil products, as well as a fair distribution of obligations to reduce oil production for large projects and old fields that are at the stage of a natural decline in production. The measures taken will reduce the risk of emergency shutdowns of Kazakhstani fields and ensure a stable flow of funds from the export of Kazakhstani oil. Thanks to the previously taken measures to reduce oil in Kazakhstan and other countries, there is a positive trend in the dynamics of oil prices (as of June 23, 2020, the price of the Brent brand amounted to 42.23 dollars per barrel) and a decrease in the imbalance in the oil market, according to the Oil and Gas Information Agency.

Natural gas production up 7% in Kazakhstan In Kazakhstan within January – May 2020 natural gas production has reached 24.8 billion cubic meters which is by 7.2% more than in the same period the previous year, bringing total to 136. The share of natural gas in a gaseous state accounted for 40.3% of production or 10 billion cubic meters; the share of oil associated gas - 59.7% or 14.8 billion cubic meters. In monetary terms, natural gas production amounted to 141.9 billion tenge. The largest volume of natural gas production was in the (45.3%, 11.2 billion cubic meters - plus 18.6% per year). West Kazakhstan region produced 36.6% of the country’s total gas production volume (9.1 billion cubic meters - plus 5%). The region produced 10.5% (2.6 billion cubic meters - minus 12, 2%). Kazakhstan exported 6.3 billion cubic meters of natural gas in January – April 2020. became the main importer of Kazakhstani natural gas. In four months Kazakhstan has exported to China 2.7 billion cubic meters of natural gas worth $566.1 million. The annual growth of exports to China in physical terms amounted to 7.4%, in monetary terms - 2.5%. 2.1 billion cubic meters of natural gas worth $101.5 million were exported to the CIS countries, according to the Oil and Gas Information Agency.

Importing countries of Kazakhstan’s oil listed Energy Minister Nurlan Nogaev said that over 4 months Kazakhstan exported more than 25 million tons of oil abroad. In January-April 2020, Kazakhstan delivered 25.2 million tons of oil to foreign countries, according to statistics. The volume increased by more than 7% compared to the same period in 2019. In monetary terms, the level increased by 12.6% to $11.9 billion. The usual buyer of Kazakhstani oil is . Significant volumes are also delivered to the Netherlands, India, , China, , Romania and other countries. The volume to India increased 4.7 times, while to , on the contrary, it decreased more than twice. Earlier, Kazakhstan entered the TOP-10 major oil exporters in the world. The country announced its readiness to reduce production in August and September, LS reported.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands Kazakhstan continues to reduce oil production The adopted a resolution On introducing temporary restrictions on the use of subsoil areas for medium, large and giant deposits in proportion to export volumes, Avesta-news.kz reports with reference to the press service of the Ministry of Energy of Kazakhstan. The adopted approach allows to meet the needs of the domestic market of Kazakhstan in the necessary volumes of oil products, as well as a fair distribution of obligations to reduce oil production for large projects and old fields that are at the stage of a natural decline in production. The measures taken will reduce the risk of emergency shutdowns of Kazakhstani fields and ensure a stable flow of funds from the export of Kazakhstani oil. Thanks to the previously taken measures to reduce oil in Kazakhstan and other countries, there is a positive trend in the dynamics of oil prices and a decrease in the imbalance in the oil market. As of June 23, 2020, the price of the Brent brand amounted to 42.23 dollar per barrel, Avesta News reported.

Kazakhstan promises to further reduce oil production in August and September During a meeting of the OPEC+ Ministerial Monitoring Committee, Minister of Energy of Kazakhstan Nurlan Nogaev noted that in May the fulfilment of the country's obligations under the agreement amounted to 71%. The total overproduction in the first 12 days of May amounted to 3.13 million barrels and is associated with the inertia of the industry. It will be offset by an additional reduction in August and September. The Minister emphasised that Kazakhstan positively evaluates the OPEC+ agreement, its positive impact on the oil industry. Kazakhstan’s reduction commitments Under OPEC+ are 390 thousand barrels per day, according to LS.

Kazakhstan enters top-10 major world oil exporters In 2019, Kazakhstan delivered abroad oil worth $33.6 billion. According to World’s top exports, in 2019 Kazakhstan ranked ninth in the ranking of countries with the highest revenue from the sale of black . The republic accounted for 3.3% of global supplies. traditionally ranks the first with revenue of $133.6 billion. This is four times more than Kazakhstan. Moreover, the kingdom’s share is 13.3%. Russia earned $121.4 billion from oil exports, which is 3.6 times more than Kazakhstan. The , which constantly dropped the price of oil throughout the year, ranked sixth in exports at $65.3 billion. Meanwhile, ’s income is slightly less than Kazakhstan’s, with $32.3 billion in revenue. Mexico ranks 15th in the ranking with $22.6 billion. In total, the share of all 15 countries is 86.7% of the world’s exported crude oil. Kazakh oil prices changed in 2019. Meanwhile, in 2020, under OPEC+ commitments to reduce Kazakhstan are 390 thousand barrels per day. At the same time, the country promises to further reduce black gold production in August and September, LS reported.

Output at Kazakhstan’s Kashagan oilfield on the rise following routine halt Oil production at Kazakhstan’s has jumped by 40% to 210,493 barrels per day from 150,000-151,000 barrels per day after planned maintenance, two industry sources said. Oil and gas condensate output in Kazakhstan rose to 204,842 tons per day as of June 23 from 197,800 tons per day on June 22, according to state monitor the Information and Analytical Center of Oil and Gas (IACOG). The Kazakh Energy Ministry has said the maintenance at Kashagan field was scheduled between June 16 and 23, according to Reuters.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands Wind farms generate 45% of renewable In the first quarter of this year, the share of green electricity in the total amount of energy generated amounted to 1.8%. This is 58% more than for the same period in 2019. Renewable energy development in Kazakhstan is accelerating. Over 3 years, the amount of green energy generated has doubled. If in 2017 stations using renewable energy sources generated 1.1 billion kW/h, in 2019 this figure was 2.4 billion kW/h. The plans of the Ministry of Energy of Kazakhstan in 2020 to bring this figure to 3.15 billion kW/h. In Kazakhstan, the share of renewable energy sources in the total amount of electricity generated remains insignificant. In 2019, this figure did not exceed 2.3%. In 2020, it is planned to increase it to 3%. This indicator is set in the Concept on the transition of Kazakhstan to a green economy. In the first quarter of 2020, the share of electricity generated by stations in the total amount of electricity generated amounted to 1.8% or 548.4 million kW/h. “The production of green energy for the first quarter of this year compared to the same period of 2019 increased by 58%,” the department said. Currently, there are 37 solar, 37 hydro, 22 wind and 5 biostations in the country. The total capacity of renewable energy facilities in 2019 amounted to 1,050 MW; by the end of 2020, it is planned to increase the capacity to 1,655 MW due to the construction of new renewable energy facilities. In January-March 2020, wind power plants generated the most electricity, 45% of the total energy produced by renewable energy sources, followed by solar power plants at 35.7% and small hydropower plants at 19%. The trend for wind and solar energy is explainable. A USAID report noted that Kazakhstan has enormous potential in the field of wind power. “Approximately 50% of the country’s wind speed is 4-5 m/s, at an altitude of 30 m. Solar energy also has enormous potential, the number of sundial hours in Kazakhstan is 2,200- 3,000 hours per year,” the report says. UNDP emphasises that almost all renewable energy technologies can be developed in Kazakhstan. “They can be associated with wind, sun, water. Also, you can actively use biogas plants, biomass boiler plants, heat and geothermal pumps. The potential for using wind and solar energy is higher than other renewable energy sources. These energy sources are more affordable, distributed throughout the country. For example, the technical potential of wind generation in the republic is 920 billion kW/h. This is greater than the current generation and consumption of electric energy in the country. Last year, Kazakhstan produced 106 billion kW/h, and the consumption amounted to 105.1 billion kW/h,” UNDP expert Yerlan Dairbekov said, according to Kapital.

PLC unit gets wind turbine installation job in Kazakhstan Monsson Operation SRL, a unit of Italian power capacity installer PLC SpA, has received a contract to install 14 Vestas turbines at phase II of the Astana Expo-2017 wind project in Kazakhstan. The turbines are of the V117-3.45 MW model by Vestas Wind Systems A/S. Monsson’s work will be completed by the end of September, while the wind parks is expected to become operational in the fourth quarter, PLC said. Monsson and heavy lifting and engineered transport expert Sarens Kazakhstan LLP have a wider agreement for turbine installation services from 2020. The latest wind contract comes within this agreement. The Astana Expo-2017 wind farm, whose two phases will bring the capacity to 100 MW, is a project of TSATEK Green Energy LLP. Vestas announced it had secured a 14-turbine order for the expansion project in November 2019, Renewables Now reported.

Kazakhstan to generate electricity from waste In Kazakhstan, electricity will be generated from waste. The relevant amendments on energy waste management were approved in the second reading by Parliament at a

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plenary meeting. As noted in the conclusion to the bill, the document was developed in order to improve the waste management system through the use of heat treatment of municipal solid waste. In accordance with the bill, the main support mechanism is the guaranteed purchase of electric energy produced by incinerators, which will be similar to the existing mechanism for supporting the renewable energy industry. The bill provides for amendments and additions to the Environmental Code and the laws of the Republic of Kazakhstan on Electricity and on supporting the use of renewable energy sources, Kazakhstanskaya Pravda reported.

Investor helps launch $3.2 billion solar station in Kazakhstan In , they want to launch a solar station for $3.2 billion. According to information, the project will be implemented before the end of 2020 in the Zhanakorgan region by the Bulgarian company Hydro Energy. “It is planned to complete the construction and commissioning of a solar power plant with a total value of $3.2 billion,” the report said. It is noted that the annual capacity will be about 19 million/kW per hour. In addition, three projects worth 47 billion tenge are being implemented in the field of renewable energy with the participation of the United Kingdom, France and investors from Bulgaria. “Two of them began work last year. In particular, in the Zhalagash region, the French company Total Eren was building a 28 MW solar power plant, in the Shieli district, the British company Baikonyr Solar launched a 50 MW solar power plant,” the Administration said. In Kyzylorda region, they also plan to build a solar power station for $100 million. The launch of the SES is scheduled for late 2021, LS reported.

Number of innovative projects are being introduced in the coal industry of Kazakhstan

The production of coal and lignite, including coal concentrate, for 4 months amounted to MINERAL 38.4 million tons, which is 0.5% more than in January-April 2019. Coal mining directly RESOURCES increased by 0.2%, to 35.2 million tons. Сoking coal production for the production of coke for blast furnace smelting increased the most, by 13.8%, up to 3.6 million tons. The largest reduction was recorded in the production of thermal steam coal for the production of steam for heating by 87.3%, up to 3.7 million tons. Explored coal reserves in Kazakhstan amount to 34 billion tons, 4% of the total world reserves. Despite the decrease in the share of coal in the global energy balance, the demand for this type of fuel in the world market will remain stable for a long time to come. In this regard, the implementation of a number of innovative projects is planned in the coal industry. In order to develop the coal industry, the Roadmap for the development of the coal industry of Kazakhstan for 2019–2021 was developed and approved. The roadmap includes measures to take systemic measures to support the industry, as well as the implementation of new projects. For example, the construction of a special coke production plant at Shubarkol Komir, the transition to cyclic-flow technology for crushing, transporting, averaging and loading coal into open-cut wagons Bogatyr, Bogatyr Komir, the Ministry of Industry and Infrastructure Development of Kazakhstan reported. In addition, this year, the National Association of Mining and Mining and Metallurgical Enterprises will carry out test works to bring the sale of coal to a digital platform. With growth in real volumes, coal production in value terms for January-April 2020 amounted to 113.1 billion tenge, against 115.5 billion tenge a year earlier. Almost the entire value of coal production was in two regions. Karaganda accounted for 53.4 billion tenge, and Kostanay for 51.3 billion tenge. Another 8 billion tenge accounted for , Energyprom reported.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands Palayan Resources acquires mineral rights in Kazakhstan Palayan Resources, Inc. has signed a Share Exchange Agreement dated June 1, 2020 pursuant to which PLYN has acquired all of the issued and outstanding shares in the capital of SMG’s wholly owned subsidiary, SMG-Gold B.V., a Netherlands incorporated company. The parties are working diligently to satisfy all requirements of the Transaction, including the transfer of shares of SMG-Gold B.V. to the Company. SMG-Gold B.V., a private company incorporated under the laws of the Netherlands, holds certain mineral rights through Altyn Kokkus LLP, a Kazakhstan limited liability partnership organized and existing under the laws of Kazakhstan, identified by a Subsoil Resources Use Contract No 2068 for land rights and underground mineral rights to the Kokkus Project, a gold and copper deposit in Kazakhstan (the “Kokkus Project”). The Kokkus Project is a gold deposit located in the Karaganda province, about 400 kilometers from the regional mining center of Karaganda. It consists of a Subsoil Resource Contract under Kazakhstan law covering approximately 16 square kilometers. “The Kokkus Project is located in one of the foremost mining regions in Kazakhstan and we are committed to exploring the potential of this property,” stated James Jenkins, President of Palayan Resources, Inc. “The Kokkus Project currently has defined drill targets based on previous drilling, geological mapping and soil sampling, and study on structural controls on Au mineralization presently demonstrating excellent potential to discover a very significant gold deposit. Management intends on aggressively growing the company, and with the upswing in gold prices, we want to build a strong gold exploration and mining company around the Kokkus property with a strong possibility of finding further major gold deposits in . We believe that this acquisition is just the beginning.” Additional details surrounding the Share Exchange Agreement may be found in the current report on Form 8-K filed on June 3, 2020 by the Company with the SEC on EDGAR. Palayan Resources, Inc. is an emerging growth company that engages in the acquisition, exploration, and development of mineral properties. Management has extensive experience in global exploration and the mining industry, according to a company press release.

TRANSPORT & COMMUNICATIONS Kazakhstan, Russia agree on joint construction of Baiterek space compound Kazakhstan and Russia have agreed on the main issues regarding the Baiterek joint project. The Baiterek project oversees construction of the Baiterek complex at the base of a number of already existing Cosmodrome sites in Kazakhstan. According to a preliminary agreement, Russia is to be responsible for the rocket construction, whereas Kazakhstan takes the responsibility for construction of the infrastructure. The agreements were reached during a meeting of Kazakhstan’s Prime Minister Askar Mamin and ROSCOSMOS Director General Dmitry Rogozin. The ROSCOSMOS report said that basic issues of launching the Baiterek joint project were agreed upon during the meeting. The agreements provide for the creation of the Soyuz-5 launch complex at Baikonur. Kazakhstan’s Baikonur city is the administrative and living center of major Baikonur Cosmodrome. The city and the Cosmodrome together create a Baikonur complex, which Russia is renting from Kazakhstan till 2050, Kazinform reported.

Kazakhstan is no longer blacklisted by EU airlines The European Commission decided not to include Kazakhstani airlines on the black list of air carriers that are forbidden to fly to the European Union, the press service of the MIID of Kazakhstan reported.

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In June, the European Commission published an updated list of airlines that are prohibited from flying to European Union countries. The decision was made by the European Commission Safety Committee in Brussels. After the crash of an aircraft of Bek Air airline, the European Commission questioned the ability of the aviation authorities of Kazakhstan to provide effective control and supervision of flight safety in the country. On February 14, the commission sent an official request on the ongoing work to change the organisational structure of the country's aviation authorities, on the results of control and oversight activities for industry entities over the past 3 years, and on the safety status of flights of the main passenger carriers, including Air Astana, Scat and Bek Air. On February 28, the Civil Aviation Committee of the MIID and the Aviation Administration of Kazakhstan informed the commission that on August 1, 2019, a new approach to regulating the civil aviation industry was launched, based on the British management model and advanced European countries. In addition, the European Commission also reported on the current state of flight safety in the country and on the results of the audit of Bek Air. The Aviation Administration later notified Bek Air that the certificate was revoked and that the Azee Air operator’s certificate was suspended. Based on the results of the report, the European Commission sent a letter of decision to the chairman of the CAC. Today there is no reason to include Kazakhstan airlines in the list of air carriers that are prohibited from flying to the European Union. Currently, the CAC and the Air Administration are planning to implement a joint project with the European Commission and the European Aviation Safety Agency to increase the level of aviation safety in Kazakhstan, leading to European standards for the system of control and supervision of aviation safety in the country and obtaining category 1 of the Federal Aviation Administration for flights to the USA. Based on the results of the meeting, the European Commission listed all airlines certified in Armenia. The list of air carriers certified in the Congo, the Democratic Republic of the Congo, Kyrgyzstan, , Nepal and Sierra Leone has also been revised and supplemented by new airlines. In total, 96 airlines from 22 countries are currently on the EU’s black list, including Afghanistan, Angola, Armenia, Venezuela, Congo, Democratic Republic of the Congo, Djibouti, Eritrea, Iraq, Iran, Kyrgyzstan, Moldova, Libya, Nigeria, Nepal, etc. according to Kursiv.

AGRICULTURE In 2020-21 MY, wheat production in Kazakhstan increases to 12.9 million tons According to the updated June report of the International Grain Council, wheat production in Kazakhstan in the next season will increase to 12.9 million tons. In comparison with the current MY, the growth will amount to 1.4 million tons. Last season, local farmers harvested 13.9 million tons of grain from their fields. The initial grain reserves of this type in the republic in 2020-21, according to the latest data, will decrease by 0.6 million tons against reserves at the beginning of this season to 1.2 million tons. In May, an expert estimate was 0.4 million tons more optimistic. Meanwhile, last year’s figure was 2.9 million tons. The supply of agricultural crops in Kazakhstan in the coming season, by contrast, will increase to 14.2 million tons. Previously, the forecast was higher by 0.4 million tons. In 2019-2020, this indicator is estimated to be lower by 0.4 million tons. In 2018-19 MY, the wheat supply amounted to 16.9 million tons. Crop export in 2020-21 MY is projected at 7.5 million tons. Previously, the prospects were appropriate. This season, deliveries abroad are estimated at 1 million tons more modest. Last season, 8.8 million tons of wheat were exported. Imports of grain of this type in Kazakhstan in the forecast period will be reduced to 0.1 million tons. This year, Kazakhstan will purchase abroad 0.5 million tons of wheat. In the

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2018-19 season, the volume of imported agricultural crops was also very modest, 0.1 million tons. The volume of wheat use in the country in 2020-21, according to the June IGC data, will decrease by 0.5 million tons compared to this season to 5.6 million tons. Previously, the forecast was higher by 0.2 million tons. In the past MY, grain consumption of this type was 0.7 million tons more. Carrying stocks of wheat in the next season will decrease to 1.1 million tons. The previous report promised slightly higher reserves at 1.3 million tons. This year, this indicator is expected to reach 1.2 million tons. Last year’s reserves in the republic amounted to 1.8 million tons, Kazakh Zerno reported.

KazAgro invests more than 64 billion tenge in projects last year During the reporting meeting, the Minister of Agriculture announced that last year, with the help of the KazAgro holding, 374,000 heads of small cattle were purchased and 82,000 heads of cattle were brought into the country. The holding allocated money for the purchase and import of livestock 12.3 billion tenge and 53 billion tenge, respectively. The company spent 19.1 billion tenge to finance 16 new projects. In total, over the past year, 54 investment projects in the field of livestock were funded for a total of 64.3 billion tenge. This year, KazAgro plans to finance the purchase of 100,000 head of cattle and 300,000 head of small cattle. The company will also provide financial support for new projects that are involved in the production of dairy products and poultry, Kazakh Zerno reported.

Kazakhstan pins hopes on foreign investors for agro-industrial development Kazakhstan has an immense potential to diversify and develop its economy through the agro industrial complex. The nation’s vast agricultural resources can produce goods meeting the needs of both its population and foreign countries. Its strategic location grants it access to a combined market of more than 500 million people. The investment opportunities in the agroindustrial business in Kazakhstan were one of the key topics during the June 17 webinar for investors from Kuwait hosted by Kazakh Invest, which provides legal consultancy and support to all investors interested in working in Kazakhstan. Kazakhstan is the world’s ninth-largest country with more than 210 million hectares of arable land and nearly 20 percent of the population employed in agriculture. “Agriculture remains the flagship of Kazakhstan’s economy which boasts vast swaths of arable land as well as direct access to major trading partners – China and Russia. Kazakhstan has the potential to play an important role in addressing the challenges of global food security,” said Diana Ablyakimova, the webinar moderator and a senior manager at Kazakh Invest national company. The most promising agribusiness projects are in the production and processing of oilseeds, meat, poultry, fish and vegetables. Kazakh Invest proposes projects worth anywhere from $12 million to $114 million for the construction of flax oil, sunflower oil, vegetable oils, and soybean processing plants. A screenshot of a slide with Kazakh Invest’s project proposals in agribusiness from the the June 17 webinar for Kuwait investors. There is a great demand in for flax seeds grown in Kazakhstan, which made the country a leading flax seed producer over the last few years. “Now they (Kazakh government) are ready to invest in the next stage – the conversion of flax seeds to vegetable oil. But they need expertise in processing, an understanding of the flaxseed oil market because this is an export product, additional sources of financing to make the project competitive. Now we are looking for foreign investors,” Madi Kanafin told The Astana Times.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands

In addition to this, the Kazakh government supports agricultural entrepreneurship in “developing new agricultural technologies, subsidizing the cost of fertilizers, and building irrigation,” he said. The government also exempts investors from corporate income tax and land taxes for up to 10 years, as well as from property tax for up to eight years. The investment priority projects will receive a 25 percent standard rate of investment subsidy. Kazakh Invest is looking for “foreign investors who can share industry best practices in the field of agricultural science,” he said. According to Kanafin, Dutch investors and agronomists have been working with local farmers in a potato processing project during the last two years. The project uses Dutch experience, standards, and technologies to get high yields of more than 100 tons per hectare, he said. Kazakh Invest operates based on the one window principle, where they clarify local laws and procedures, provide transparency on decision-making, and reduce the administrative burden, according to Astana Times.

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ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands CONTACTS

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