Economic Newsletter Kazakhstan December

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Economic Newsletter Kazakhstan 31 December 2020

CONTENTS:

AGRICULTURE Seed imports are growing every year Kazakhstan is looking for investors in apples Problems and opportunities of irrigation in Kazakhstan Vulnerability of Kazakh agriculture to climate change

ENVIRONMENT Kazakhstan approves working plan for transition to green economy Kazakhstan awards 148 MW in this year's renewables tenders New solar project

ENERGY & NATURAL RESOURCES Oil sales account for more than 46% of Kazakhstan's exports in October Kazakh oil auction dominated by Dutch-registered newcomer The volume of oil produced in Kazakhstan from January to November

MACRO-ECONOMICS & FINANCE Top-10 investment projects The most interesting areas for investors from Northern Europe National Bank of Kazakhstan predicts 2021 economy Kazakhstan to start production of Russian vaccine

TRANSPORT & COMMUNICATIONS Kazakhstan’s airlines lose 356 billion tenge Flights from Kazakhstan

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, December 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan AGRICULTURE Seed imports are growing every year Over the past three years, Kazakhstan has imported $59 million worth of agricultural seeds. This figure is increasing every year: in 2017 - 31.600 tons were imported for $52.7 million, in 2018 – 60.000 tons for $55.7 million, in 2019 - 103.600 tons for $68.6 million. 342 seed producers are engaged in the production and sale of high-reproduction seeds. The Ministry of Agriculture argues that the industry also requires advanced technologies and knowledge. Source: LS (Kazakhstan)

Kazakhstan is looking for investors in apples Kazakhstan plans to fully meet the domestic demand for apples with its own production by 2024. The state sees one of the mechanisms for the development of the industry in increasing subsidies for investments in apple orchards and the construction of fruit storage facilities. In 2019, according to the Ministry of Agriculture, 344.300 tons of apples were eaten and processed in Kazakhstan, and 216.500 tons were grown. Deficit of 127.800 tons was covered by imports. The largest supplier is Poland (at least 60.000 tons). In the first nine months of 2020, Kazakhstan has already imported 43.000 tons of Polish apples worth $20.4 million (47.5 cents per kilogram). In the next four years, 6.600 hectares of new apple orchards will appear in Kazakhstan. There are already possible investors for more than five thousand hectares. Source: Kursiv (Kazakhstan)

Problems and opportunities of irrigation in Kazakhstan Irrigated agricultural land is mainly located in the southern and South-Eastern regions. In 2019, the total increase in irrigated land was by 21.500 hectares. However, not all arable land is used for its intended purpose: according to the Ministry of Agriculture, 660.200 hectares were not used in 2019. The main reason for underutilization of irrigated land is significant wear and failure of irrigation and drainage systems, accompanied by deterioration of land reclamation conditions. A significant problem in irrigated agriculture is the lack of water metering devices and regulatory distribution facilities for irrigation channels. As a result, there is an uneven use of irrigation water depending on the location of the irrigated areas in relation to the main channel. Farmers whose fields are located in close proximity to the main canal receive water in excess, and as land plots are more remote, there are problems with irrigation. Source: Zerno Kazakhstan

Vulnerability of Kazakh agriculture to climate change The latest UNDP report on food security and nutrition in the world 2020 predicts reduced yields of wheat in Kazakhstan. In 2030, the yield of spring wheat will be 63-87% of its current level, whereas in 2050 a yield of 51-80% is expected. Seven Kazakh regions (Akmola, Aktobe, West Kazakhstan, Karaganda, Kostanay, Pavlodar, and North Kazakhstan) were studied. Given the fact that Kazakhstan is the 9th largest producer and 7th largest exporter of wheat in the world and the only exporting country in Central Asia, the lack of climate change adaptation measures in Kazakhstan may pose a threat to food security in the entire region. Source: Kapital (Kazakhstan)

ECONOMIC NEWSLETTER, December 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan ENVIRONMENT Kazakhstan approves working plan for transition to green economy In 2021, water resources use, waste management and the development of a low-carbon development strategy is on the agenda. The new Environmental Code of Kazakhstan aims to stimulate enterprises to modernize production by using the best available technologies (BAT) based on the experience of EU countries. Source: Kapital (Kazakhstan)

Kazakhstan awards 148 MW in this year's renewables tenders Kazakhstan has awarded 147.95 MW of projects in its latest tenders to generate renewable energy capacity. The selected proposals include wind, solar photovoltaic (PV), hydropower and biogas technologies. Overall, the tender rounds were about two times oversubscribed, with the wind category attracting the greatest interest and a five-time oversubscription. Most of the bids were placed by Kazakh companies, while proposals were also launched by companies from the Netherlands, Germany and Russia. Source: Renewables Now

New solar project An investor from the Czech Republic will invest in an electric power project in the Almaty region. The cost of the green facility is estimated at 50 billion tenge (about $120 million). The project implementation period is 2020-2022. Its capacity will be 100 MW. In addition, the Czech investor signed a Memorandum of understanding with the Akimat (municipality) of Karaganda region on investments in renewable energy sources of $500 million in the next 3-5 years. Source: LS (Kazakhstan)

ENERGY & NATURAL RESOURCES Oil sales account for more than 46% of Kazakhstan's exports in October According to the Bureau of National Statistics, goods worth a total of $3,7 billion were exported in October. This is the highest result in the last 4 months. At the same time, the figures grow every month. As a result, in October, exports surpassed imports by $256.5 million. This is mainly due to a growth of sales of raw materials, first of all-crude oil. In October, Kazakhstan sold about 5.3 million tons of oil abroad (+157.2 thousand tons compared to September). Revenues from transactions increased by 10.8%, amounting to $1 billion 747.6 million. Source: Asiais (Russia)

Kazakh oil auction dominated by Dutch-registered newcomer A Dutch-registered offshore player called Winsple Netherlands BV snapped up two large onshore blocks in the Atyrau region of Kazakhstan at the country’s first online licensing auction. Winsple committed to pay more than $140 million for the Zaburunye and Sarayshyk blocks, promoted by Kazakh authorities as containing prospective oil resources at both shallow and deeper horizons. Winsple has no known track record in exploration or production and employs just a single executive director. The firm was incorporated in 2017 and is affiliated to Winsple Holding, a privately held entity incorporated in Luxembourg in 2015. Source: Upstream

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

The volume of oil produced in Kazakhstan from January to November Kazakhstan produced 78.5 million tons of oil during the first 11 months of 2020, while Kashagan produced 13.9 million tons. Tengizchevroil (TCO) accounts for 24.3 million tons of oil, North Caspian Operating Company (NCOC, operator of the Kashagan field) 13.9 million tons and Karachaganak Petroleum Operating (KPO, operator of the Karachaganak field) 11.07 million tons. In November the price of oil increased by 27% from $37.5 to $47.6 per barrel. In December, oil prices are steadily rising after OPEC+ (Organization of the Petroleum Exporting Countries) decided to increase production at a more gradual pace. The countries participating in the OPEC + deal agreed to increase oil production by 500 thousand barrels per day from January 2021. Thus, the overall decline in OPEC+ production in January will be at the level of 7.2 million barrels per day from the level of October 2018. The parties also agreed on the possibility to adjust quotas every month, but not more than 500.000 barrels per day. Source: Kursiv (Kazakhstan)

MACRO-ECONOMICS & FINANCE Top-10 investment projects It is planned to build a plant for the disposal and processing of solid household waste in the Almaty region. The top-10 projects also include a meat-processing and packaging plant. By 2024, deep oil refineries and liquid methanol productions will be opened in the West Kazakhstan region. The construction of a dairy complex is planned. Greenhouse complexes are to be commissioned in 2021. In addition, the government formed a pool of 93 investment projects for the construction of private schools and dormitories worth in total 405 billion tenge (about $960 million). Source: Kazakhstanskaya Pravda

The most interesting areas for investors from Northern Europe Over the past 4 years, the trade turnover between Northern Europe (Sweden, Norway, Denmark and Finland) and Kazakhstan has amounted to more than $3 billion. The most interesting areas for investors are projects in the field of agriculture, alternative energy, finance, technology, transport and logistics. According to Ministry of Foreign Affairs of Kazakhstan: “One of the advantages of Kazakhstan among the countries of the region is its direct access to a market with 500 million consumers, including the countries of Central Asia and Western China." Source: Kapital (Kazakhstan)

National Bank of Kazakhstan predicts 2021 economy According to the National Bank of Kazakhstan, as the epidemiological situation stabilizes, the global economy and domestic demand will recover, GDP dynamics will move into a positive trend in the second quarter of 2021. The growth rate is expected to be 3.7 - 4%. In the first half of 2022, the pace is projected at the same level. Source: LS (Kazakhstan)

Kazakhstan to start production of Russian vaccine Russia was one of the first to announce the development of a COVID-19 vaccine called “Sputnik V” in August. More than 30 countries have already applied for the vaccine, including Kazakhstan. Russia will supply more than two million doses of the vaccine to Kazakhstan with a possible increase of the volume to 5 million doses. Government

ECONOMIC NEWSLETTER, December 2020 Embassy of the Kingdom of the Netherlands in Kazakhstan officials say the first to receive the vaccine free of charge will be at-risk citizens, including health workers, elderly people and patients with chronic diseases. The vaccine will be available on international markets for less than $10 per dose. It can be stored at between two and eight degrees Celsius instead of the temperatures far below freezing required for some other vaccines. Along with the Russian-made vaccine, Kazakhstan is also considering purchasing AZD1222 — a COVID-19 vaccine candidate developed by Oxford University and AstraZeneca, a British–Swedish multinational pharmaceutical and biopharmaceutical company. In addition, researchers at the Kazakhstan Research Institute for Biological Safety Problems have been developing their own vaccine. Source: Agence France Presse

TRANSPORT & COMMUNICATIONS Kazakhstan’s airlines lose 356 billion tenge Losses of Kazakhstan's civil aviation companies exceed 350 billion tenge (about $840.000) in 2020. The number of passengers carried by domestic airlines in the first 10 months of 2020 amounted to 4.4 million people, which is 38% less than the same period in 2019. As part of the fight against COVID-19, Kazakh airlines have carried out more than 70 repatriation and export flights, and transported about 11.000 passengers. 55 humanitarian flights were performed and more than 555 tons of cargo were transported in the form of ventilators, protective masks, suits, rapid tests, and necessary medicines. According to estimates of the International Air Transport Association (IATA), the full recovery of traffic volumes to the level of 2019 will occur no earlier than 2023. Source: LS (Kazakhstan)

Flights from Kazakhstan Currently, Kazakhstan operates flights to Germany, Kyrgyzstan, Russia, South Korea, the Netherlands, the United Arab Emirates, Turkey, Ukraine and Uzbekistan. Kazakhstan reduced the number of flights to Turkey from 20 to 10 per week. Starting October 26, all passengers arriving in Kazakhstan from abroad must present a negative PCR test result to avoid quarantine. Foreigners who are unable to show such a document will not be allowed to board the aircraft. Source: Astana Times

CONTACTS

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

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