Economic Newsletter on Kazakhstan |November 2019 CONTENTS MACRO-ECONOMICS & FINANCE ......................................................................................2 ENERGY & NATURAL RESOURCES ......................................................................................5 TRANSPORT & COMMUNICATIONS................................................................................ 10 AGRICULTURE ................................................................................................................. 12 EXHIBITIONS IN KAZAKHSTAN (January-March 2020) .................................................... 16 CONTACTS ...................................................................................................................... 17 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 2019 Embassy of the Kingdom of the Netherlands MACRO-ECONOMICS & FINANCE Ministry of National Economy of Kazakhstan expects GDP growth above 4% The Ministry of National Economy of Kazakhstan maintains positive intentions for forecasting GDP growth in 2019. “At the moment, there are prerequisites for higher economic growth by the end of the year, than at the planned level of 3.8%. In January- September, growth reached 4.3%. There was a positive trend in construction, trade, transport sector, communication services and industry,” the Ministry of National Economy said. “We take into account possible global and regional factors that may have a deterrent effect on the country’s economy. Given the current situation, we allow the possibility of growth by over 4% on-year,” the department said. In the forecast of socio-economic development of the country, the economic growth in 2019 is set at 3.8%. The forecast was made taking into account the oil price of $55 per barrel. In 2018, Kazakhstan’s GDP grew by 4.1%, In Business reported. IMF expects Kazakhstan’s further high economic growth Kazakh Prime Minister Askar Mamin met with the experts from the International Monetary Fund (IMF), led by the head of its Kazakhstan’s mission Mark Horton. Following the mission to Kazakhstan in last November, the experts pointed out further high economic growth in Kazakhstan, mainly due to the non-oil sector, and in the first instance, construction and services. PM Mamin said that the Kazakh economy was showing a stable growth trend – in the first 10 months of 2019, GDP increased 4.4% year-on-year. The sides also discussed issues of monetary, exchange rate, fiscal and budgetary policies, the situation in the banking sector, Kazakhstan’s economic structural reforms, as well as the upcoming opening in 2020 in Almaty of the IMF Regional Technical Assistance Centre for the countries in the Caucasus, Central Asia and Mongolia. It was reported earlier that the IMF revised up its forecast for Kazakhstan’s GDP growth from 3.2% to 3.8% for 2019, according to Interfax-Kazakhstan. Kazakhstan’s current account deficit nears $5 billion Over the first 9 months of 2019, the current account of the balance of payments developed with a deficit of $4.7 billion, Kazpravda.kz cites the press service of the National Bank of Kazakhstan reporting. “According to preliminary estimates, over the 9 months of 2019, the current account of the balance of payments developed with a deficit of $4.7 billion. The main factor was a decrease in the surplus of the trade balance by $ 4 billion (-21.6%) to 14.5 billion. Export of goods decreased slightly by 2.2% to $42.7 billion, which was mainly due to a decrease in crude oil exports by 10.7%, including due to a decrease in the average contract price for oil by 7.9% from $66.9 to $61.7 per barrel. Imports of goods grew by 12.2% to 28.2 billion, which is explained by an increase in the import of investment goods by 31.4%. It is due to the acquisition of imported equipment and materials for continuation of the major raw materials and infrastructure projects, including TCO and Kashagan, pipeline Saryarka, BARR and auto assembly plant,” NBK reported. At the same time, export of services has grown by 4.6% to $5.7 billion, while imports decreased by 8.1% to $8.1 billion, which positively told on the balance of foreign trade in services. Incomes of foreign direct investors in the 9 months of 2019 decreased by 2.5% to $16 billion. More than half of the income of non-residents from direct investments was directed to financing of Kazakhstan enterprises’ subsidiaries. On the financial account (excluding operations with reserve assets of the National Bank), the balance improved by $0.6 billion and a net outflow of $1.2 billion formed. At the same time, on foreign direct investment, the net capital inflow for 9 months of 2019 amounted to $5.1 billion. Net growth was noted of residents’ foreign investments in portfolio investments by $2.6 billion, on other investments - by $3.7 billion. 2 ECONOMIC NEWSLETTER, November 2019 Embassy of the Kingdom of the Netherlands Reserve assets (excluding assets of the National Fund of the Republic of Kazakhstan) as of October 1, 2019 were estimated at $28.8 billion, which covers the financing needs of 7.1 months of Kazakhstan’s import of goods and services. Kazakhstan to tighten hiring practice for foreign workers, counter wage imbalance Kazakhstan will tighten the laws regulating the process of hiring foreign workers, after inspections led by the Ministry of Labour and Social Protection identified labour and migration legislation violations at 63 large enterprises, including disproportionate salaries between the foreign and local workforces, reported tengrinews.kz on November 3. The ministry reported on the legislation violations, enterprise inspection results and possible solutions during a meeting with Deputy Prime Minister Berdibek Saparbayev and heads of the Aktobe Region’s large enterprises. The session considered compensation, repaying wage liabilities, labour conflicts, businesses’ social responsibility and attracting foreign labour. “We plan to tighten the rules for recruiting foreign labour. We will reduce the quota by no less than two times and tighten the rules for issuing permits for the fourth category (working specialties),” said Minister of Labour and Social Protection Birzhan Nurymbetov. The plan involves introducing the employer’s responsibility and obligation to create equal working and living conditions for employees. The ministry will modify industry inspection criteria, annually checking enterprises that attract more than 30 foreign workers. Nurymbetov noted 21,000 foreign specialists have permission to work at 2,400 Kazakh enterprises. “With the Prosecutor General’s Office, we inspected 63 large enterprises. The inspection revealed 794 facts of labour legislation violations, including 700 facts of wage imbalance at 23 enterprises, meaning the salary of foreign specialists for one position was higher than that of Kazakh employees. With regard to this, we revoked the permissions of 657 foreign workers,” he said. He added the government bodies issued 56 orders regarding violations that revealed and imposed 282 fines totalling 87 million tenge ($224,000). The second inspection stage checked 34 additional enterprises and identified 135 labour violations. Nurymbetov specifically addressed Arabtec Consolidated Contractors Limited Project Manager John Campbell regarding violations at the Abu Dhabi Plaza construction site. “For example, you provide three meals a day for foreigners living in a hostel, the cost of which is up to 3,000 tenge ($8). The local staff, they dine separately, with compensation payments of 800 tenge ($2). In addition, your company attracted foreign workers that do not correspond to the position for which you received permission,” he said. The ministry also plans to return to the compulsory practice of replacing foreign workers with domestic specialists. “You will get permission to attract a foreign specialist for one-three years, but after the term expiration the employee needs to be replaced by a Kazakh specialist. We have been attracting foreign labour for 25 years. I think that time was enough to train our own specialists,” added Nurymbetov. Saparbayev supported the minister’s proposals. “If we invite a foreign worker, then after a certain time we must replace him with a domestic worker. We have enough universities and enterprises. For a quarter of a century we have been attracting foreign workers, but we are not preparing our own. Perhaps next year we will exclude the issuance of permits for the fourth category,” he said, according to The Astana Times. Number of Chinese companies in Kazakhstan grows by almost 19% The number of operating foreign companies is growing in Kazakhstan. Since the beginning of the year, their number has grown by 10.5%. Most of all in Kazakhstan are foreign 3 ECONOMIC NEWSLETTER, November 2019 Embassy of the Kingdom of the Netherlands companies from Russia at 6.9 thousand, Turkey at 1.9 thousand, China, Uzbekistan at 1.1 thousand each, and Kyrgyzstan at 873. The largest increase in the number was recorded by Afghanistan. There are more than 50% more companies with capital from this country since the beginning of the year. The number of Tajik