machine-building industry in Kazakhstan has a big potential for further development. Currently, a growing demand for machinery in oil and gas sector as well as in other A industries makes this industry an important factor for the development of the country’s economy. Tractor and agricultural machinery building sector, well developed in the country during Soviet time, remains one of the principal activities of the industry. In 2000, there were 948 tractors produced in Kazakhstan. The importance of the production of tractors is due to the fact that the country used to have well developed agrarian sector in the past, which demanded a high level of technical support. The agriculture historically is one of the main sectors in need of tractors and continually requires the renewal and replenishment of the fleet.
The industrial mechanical engineering sector of the country is capable of meeting only 10 to 30 percent of demand by different industrial sectors. The rest of the demand is met by the import of machinery and equipment from abroad. Different types of farm machines, trucks and passenger cars come from CIS and other world regions.
Kazakhstan’s mechanical engineering sector is currently represented by 2,937 machine industry and metalwork plants. Tractor and farming machine industries are well represented in the country as, to a lesser degree, are the electrical, road building, and municipal engineering industries.
Other priority branches of the sector, such as the air transport, chemical, and petroleum machine industries are underrepresented. The import of rolling-mill machinery, mining machines, and cutting machines has failed to improve the Republic’s situation in this sector, however efforts are currently being made to develop an engine making industry within the Republic.
The machine-building sector possesses modern machinery, which is particularly advanced in those engineering plants that operate at a high production level.
In 2000, the volume of production in the industry increased 1.8 times compared to the previous year figure. The production of transport equipment increased almost 2 times, machines and equipment — 1,2 times, electric and electron equipment growth — by 10 %.
The creation of machine-building complex headed by OJSC “Kazakhstantractor” (Pavlodar) allowed keeping key fixed assets of tractor production and resuming production of caterpillar tractors and other import substituting products for energy and mining industries, railroads, and other sectors.
The development of tractor and agricultural machine-building sector is also carried out by OJSC “Astana Technopark”, OJSC «Kyzylordarismash», OJSC “Uralsk-agromash”, OJSC “Almaty plant “Porshen”, JSC “Electroapparat”, “Kazenergokabel”, OJSC “Kentau excavator plant”, and other companies.
At present, the government is actively supporting domestic producers. A Small Business Development Fund has been created to provide loans for investment projects, a Financial Support Fund for Farming is to support the production of agricultural machines; quotas on imports have been imposed to protect domestic producers, and machine-building enterprises have been granted tax concessions. Also, a restructuring, segmentation and diversification of production at many plants, over the past 5 years, has allowed them to lower the cost of their products and to find new consumers. These changes have had a good effect on maintaining the business activity of many plants.
Under the State Program of Development and Conversion for the defense industry, the government will support the creation of high-tech product facilities, place orders with machine-building companies and encourage the export of certain types of machinery.
Doing Business in Kazakhstan - 1 - Machinery The Program of machinery-building complex development in the Republic of Kazakhstan for 2000-2003 aims at implementing a long-term development strategy for machinery-building sector. The government will support:
· Tractor and agricultural machinery-building, including agricultural product processing equipment and spare parts; · Transport machinery-building, including the production of cars, road repair equipment, containers, equipment and spare parts for railway transport; · Machine-building for oil and gas industry and oil and gas refining industry; and · Production of equipment for mining sector.
The priorities in other branches of machine-building sector (car industry, tool making industry, medical equipment other machine-building industries) are given to such projects as the development of high-tech products capable of competing with foreign counterparts.
Another factor stimulating sector growth is National Program of Import Substitution. At present about 25% of whole country’s import is constituted by equipment. Large part of this share can be considered as candidate to above mentioned program in the Machine-building Industry framework.
Among multiple projects of the sector, foreseen under category of Import Substitution Program, several can be mentioned as principal ones:
· Grain harvesters production in Pavlodar; · Cars production in Ust-Kamenogorsk; · Recent acquisition of “Munaimash” company by national operator “Kazakhoil” with plans to recover heavy machinery production for oil&gas industry.
Overall, the machine-building sector of the country has significant production potential. However, to fully realize this potential, substantial financial and technical investment is still required.
Doing Business in Kazakhstan - 2 - Machinery