Economic Newsletter on Kazakhstan |September 2019

CONTENTS MACRO-ECONOMICS & FINANCE ...... 2 ENERGY & NATURAL RESOURCES ...... 4 TRANSPORT & COMMUNICATIONS...... 8 AGRICULTURE ...... 9 EXHIBITIONS IN KAZAKHSTAN (October 2019)...... 13 CONTACTS ...... 14

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, September 2019 Embassy of the Kingdom of the Netherlands MACRO-ECONOMICS & FINANCE Economy of Kazakhstan grows by 4.3% since the beginning of the year In August 2019, the economy of Kazakhstan remained stable. This was announced at a government meeting by the Minister of National Economy, Ruslan Dalenov. “Over 8 months, GDP growth accelerated to 4.3%. Against this background, all international rating agencies confirmed the sovereign credit rating of Kazakhstan at the level of investment attractiveness. Moody's improved its outlook from stable to positive,” the minister said. The main factors of economic growth were investment activity and stable inflation. Thus, investment growth amounted to 10.7%. The largest increase was noted in agriculture by 57.1%, construction by 30.9%, trade by 20.4%, and industry by 17.7%. “For the third month in a row, inflation has remained low at 0.2%. Annual inflation is within the target corridor and amounted to 5.5%,” he stressed. Industrial production over 8 months of this year accelerated to 3.2%, Kapital reports.

Kazakhstan attracts $330 billion FDI since 1991 Kazakhstan has attracted $330 billion in foreign direct investment (FDI) from more than 120 countries since its independence, said Kazakh Deputy Prime Minister Zhenis Kassymbek at a September 5 government meeting. More than 50% of FDI in Kazakhstan was attracted from the European Union (EU), including 90.4 billion from the Netherlands, $25.8 billion from Switzerland, $16.1 billion from France, $8.7 billion from Italy, $7.6 billion from Belgium and $5.2 billion from Germany. In addition, 15% or $48.4 billion of FDI was attracted from the United States, and 5% from the United Kingdom and China each. Kazakh President Kassym-Jomart Tokayev set foreign investment attraction as a priority in his September 2 state-of-the-nation address. Six hundred and fifty FDI projects have been proposed in Kazakhstan since 2010, of which 185 were proposed by EU investors, 111 by Russian investors, 80 by Turkish investors and 55 by Chinese investors. There are also approximately 19,000 businesses with foreign investor involvement in Kazakhstan as of August 1, of which 35.3% involve Russian investors, 9.5% involve Turkish investors, 5.7% involve Uzbek investors, 5.6% involve Chinese investors and 3.1% involve German investors. Two hundred and thirty-five FDI projects worth $16.2 billion have been implemented since 2010, of which 133 projects have been implemented with the EU and Russia. Priority has been given to high-tech projects that involved technology transfer and job creation for people in Kazakhstan. “Given global instability and sanctions, investors choose countries with a stable investment climate. Each country seeks to increase its investment rating, so that not only capital enters the country but, also, new modern technologies,” said Kassymbek. China has funded and implemented 15 projects worth $3.9 billion in Kazakhstan since 2015, which is approximately 6% of the total FDI projects implemented in the country since 2010. This has led to the creation of 3,828 jobs in mechanical engineering, chemical industry, alternative energy and agribusiness. Five more Kazakh-Chinese projects will be implemented in the country before the end of the year, and new projects that will be implemented in the next 5-6 years are set to create approximately 20,000 new jobs. “All of these projects in various regions of the country use modern technology, are export-oriented and create jobs for people in Kazakhstan,” said Kassymbek, The Astana Times reported.

Kazakhstan’s international reserves continue to decline Kazakhstan’s international reserves amounted to $87.7 billion. According to the National Bank, as of August 1 of the current year, the National Fund’s assets amounted to almost BANKING $60 billion, and gross international reserves to $27.7 billion. Thus, international reserves 2

ECONOMIC NEWSLETTER, September 2019 Embassy of the Kingdom of the Netherlands

amounted to $87.7 billion. The amount decreased by $600 million on-month, and by $1.4 billion from the beginning of the year. The maximum reserve was observed in January 2019 at $90 billion, the minimum was in March at $87.5 billion. The assets of the National Fund from the beginning of the year increased by $2 billion to $60 billion. While gross international reserves decreased by $3.2 billion to $27.7 billion, LS reported.

Kazakhstan may provide support to banks for 400-600 billion tenge after Asset Quality Review The government of Kazakhstan is likely to launch a program of state support for the financial sector after assessing the quality of assets of the country’s banks, Vladlen Kuznetsov, a leading analyst at Moody’s banking sector in Kazakhstan, said. “I do not exclude that certain measures will be taken by the state. Because it is unlikely that the National Bank will simply announce the size of bad loans and the level of capital shortfalls without further measures to rehabilitate the banking sector,” Kuznetsov said at a Moody's conference in Almaty. “Of course, measures will be proposed to improve the situation, including in the form of financial support. We expect that a program will be developed to improve the sector,” he added. According to Moody’s, the banking sector may require up to 400-600 billion tenge. “But these are estimates based on our methodology, according to the AQR results, a different amount can be obtained, since it can be based on other evaluation criteria,” Vladlen Kuznetsov noted. Moody’s expects state support will be provided to large banks. “The banking sector will probably be able to make up for the missing 400-600 billion tenge, but after a few years. However, at the moment, the task is to improve the banking sector as soon as possible,” Moody’s analyst said. As you know, the National Bank began assessing the quality of assets on August 1 and plans to complete it in late November or early December of this year. The audit covered 14 banks of the country. The banking sector of Kazakhstan is represented by 28 banks, Kapital reports.

Two banks merge in Kazakhstan Jýsan Bank and First Heartland Bank completed the merger. According to the financial institution, as a result of consolidation, the volume of assets of First Heartland Jýsan Bank amounted to 1.2 trillion tenge. Equity increased by 14%, up to 144 billion tenge, and customer accounts exceeded 620 billion tenge. As of August 1 of this year, Jýsan Bank’s current liquidity ratio of at least 30% amounted to 1,549.6%. The capital adequacy ratio reached 27.5%, with the standard not less than 7.5%. In early February this year, First Heartland Securities brokerage company bought 99.5% of the shares of Tsesnabank. After fulfilling the preconditions, the bank was recapitalised in the amount of 70 billion tenge. Later Bekzhan Pirmatov was appointed the Chairman of the board of Tsesnabank. The board of directors of the financial institute was headed by Shigeo Katsu. Since December 2010, he is president of Nazarbayev University. At the end of 2018, Tsesnabank showed a negative trend in its loan portfolio at 297 billion tenge; 17.4%. An outflow of deposits was also observed by 859.9 billion tenge, or 55.1%. In April, Tsesnabank changed its name to First Heartland Jýsan Bank with the retail brand Jýsan Bank. KPMG audited the financial statements of First Heartland Jýsan Bank for 2018. They expressed a negative opinion regarding the financial statements of the financial institution, LS reported.

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ECONOMIC NEWSLETTER, September 2019 Embassy of the Kingdom of the Netherlands ENERGY & NATURAL RESOURCES Oil production in Kazakhstan aimed to reach 105 million tons by 2025 By 2025, the annual oil production in Kazakhstan will reach 105 million tons. This was announced by Minister of Energy Kanat Bozumbayev during the celebration of the 120th anniversary of Kazakhstani oil. “A number of large-scale and long-term engineering projects are ongoing in the oil and gas industry. In oil production, the main increase in investments in the medium term and in the amount of $44.5 billion falls on the implementation of three projects, including the project for the future expansion of Tengiz worth $36.8 billion, projects for the expansion of the 1st stage of Kashagan worth $2 billion, projects for the extension of production at Karachaganak worth $4.5 billion,” the minister said. More than 46,000 Kazakhstani workers are involved in Tengiz. The successful implementation of the FEP will ensure a significant increase in oil production in Tengiz. It will increase the annual level by 12 million tons from 2023. Today, Kashagan has reached a production level of 380,000 barrels per day. Ongoing projects are aimed at achieving production of 420,000 barrels per day in 2022 and 500 thousand barrels per day in 2027. Projects to extend the level of production at Karachaganak will help maintain the level of production for the long term, In Business reports.

Kazakhstan vows loyalty to OPEC+ Kazakhstan plans to fulfill its commitments under the OPEC+ oil output cut agreement, the press service of the country’s Energy Ministry said. The ministry pointed out that Omani Oil Minister Mohammed Rumhi suggested recently that the compliance of Kazakhstan and two other countries was of concern. “Kazakhstan’s current commitment on oil output is 1.86 million barrels daily. After the first eight months of 2019, the daily average output was 1.796 million barrels daily, which is 64,000 barrels daily below the commitment. After 15 months (from January 2019 to March 2020) the daily average output is expected to be at 1.85 million barrels per day. Thus, Kazakhstan intends to completely fulfill its commitments under the agreement,” the ministry said, Sputnik News reports.

Kazakhstan increases oil production in January-August by 0.5% In Kazakhstan, in January-August 2019, 51.364 million tons of crude oil and 8 million 422.5 thousand tons of gas condensate were produced, which is respectively 0.5% more and 4.8% less compared to January-August 2018. The production of natural gas in a gaseous state amounted to 15.571 billion cubic metres, 0.3% less, the statistics committee of the Ministry of Economy said. The production of associated petroleum gas in the reporting period amounted to 22.264 billion cubic metres, 2.9% more. In January-August 2019, Kazakhstan produced 2.781 million tons of gasoline, including aviation fuel, which is 13.4% more than in January-August 2018. Diesel fuel production increased by 9.7%, to 3.33 million tons, fuel oil by 3.4%, to 1.971 million tons, In Business reports.

ENI, Total boost investments in Kazakhstan ENI and Total will explore Caspian oil and gas blocks in Kazakhstan’s waters, targeting Abay and Kashagan, plus onshore Karachaganak and Dunga. Kazakhstan’s state-owned KazMunayGas and Eni Isatay, a subsidiary of the Italian energy company Eni, plan to drill an exploration well to 2,500 meters at the offshore Abay oil field. They will also conduct a 2-D seismic survey. Cost of the project exceeds 14 billion tenge (approximately $36.5 million.)

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The Abay oil field lies at a depth of eight to 10 meters (27-33 feet), 43 miles northwest of the Buzachi Peninsula. Oil reserves are estimated 337 million tons by some sources. Eni has been active in Kazakhstan since 1992 and its investments there exceed $15 billion. Eni holds stakes in both the Karachaganak gas field and the Kashagan oil and gas fields. Kashagan is reputed to be the world’s largest discovery in the last 30 years. At the same time, Eni holds a 16.81% interest in the North Caspian Sea Production Sharing Agreement that defines terms and conditions for the exploration and development of Kashagan field. The PSA expires in 2041. Meanwhile, the Kazakhstani government has agreed another deal with France’s Total, Oman Oil Company Exploration & Production, and Portugal’s Partex Oil and Gas. The government in Kazakhstan’s capital Nur-Sultan (formerly called Astana) approved a 15- year extension of the PSA for the Dunga field, originally signed in 1994 and due to expire in 2024. In addition, the parties agreed to launch Phase 3 of the development of the same field, which is operated by Total (60%), alongside the Oman Oil Company (20%) and Partex (20%). Located in Kazakhstan’s western region of Mangystau, the Dunga field was discovered in 1966 and it was developed by Total E&P Dunga GmbH, a part of Total S.A. The total proven reserves of the Dunga oil field are estimated to be around 106 million barrels. Officials from Total say that Phase 3 will add wells to the existing infrastructure and upgrade the processing plant to increase its capacity by 10% to 20,000 barrels of oil per day by 2022. The project requires a $300 million investment and will create 400 more direct jobs in the region at the peak of construction activity. “This low-investment-cost-per-barrel development maximizes the field’s potential and extends plateau production,” said Arnaud Breuillac, Total Exploration and Production president, according to a statement published on the company’s website. “This new development phase, combined with the Dunga field license extension, helps unlock 70 million barrels of additional reserves, which represents a significant development for Kazakhstan,” he added. At the same time, the agreement provides for an increase in the share of Kazakhstan within the PSA from 40% to 60% by January 1, 2025. In addition, the companies are obliged to supply some part of the extracted oil to the Kazakhstani market and finance social infrastructure projects in the amount of at least $1 million annually, Oil and Gas Eurasia reports.

Kazakhstan’s Kashagan field output to reach half a million barrels of oil per day as of 2027 The level of daily production at the Kashagan oil field reached the 380,000 barrels, the press service of Kazakhstan’s oil ministry said on 16 September. The North Caspian Operating Company (NCOC) international consortium plans to reach 420,000 barrels per day by 2022 and 500,000 barrels per day in 2027. Covering the Kashagan, Kalamkas, Kairan, Aktoty, and Kashagan south oil fields, the North Caspian Project is the first major offshore oil and gas development in Kazakhstan. The giant Kashagan field ranks as one of the largest oil discoveries of the past four decades with approximately 9-13 billion barrels (1-2 billion tons) of recoverable oil. The Kashagan reservoir lies 80 km offshore from the city of Atyrau in 3-4 meters of water and is more than 4km deep. In 2016, the first offshore oil in the history of Kazakhstan was commercially produced from Kashagan. The operator of the project, North Caspian Operating Company N.V. (NCOC), completed a major pipeline replacement project ahead of schedule and on 28 September re-opened the first wells offshore. The first 1 million tons were exported in the first days of 2017, and NCOC safely reached actual production levels of over 200,000 barrels per day in mid-2017. Given its scale and technical complexity, the North Caspian project will be developed in phases. The

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estimated cost of Kashagan Phase 1, which began commercial production in 2016, is about $55 billion, New Europe reports.

Karachaganak consortium may pay another $1 billion to Kazakhstan The participants of the Karachaganak project Royal Dutch Shell Plc, Eni SpA and their partners may be obliged to pay an additional $1 billion to Kazakhstan. According to sources, this amount will be needed as part of the settlement of the dispute with Kazakhstan over the distribution of income, taxes and costs for energy projects. In 2018, Kazakhstan and the Karachaganak consortium reached an agreement after a long dispute. According to them, the Karachaganak consortium pledged to pay cash compensation in the amount of $1.1 billion to Kazakhstan. They were also included in the production sharing mechanism of the final production sharing agreement, which gives the country additional project income of about $415 million until 2037 year at a price of $80 per barrel. In addition, the consortium pledged to provide the country with a long-term loan for a period of 10 years for the construction of an infrastructure project in the amount of $1 billion, or pay the equivalent value of the loan in the amount of about $200 million, LS reports.

Construction of gas distribution network to begin in Kazakh capital in 2020 Phase 1 construction of the Saryarka gas pipeline ring main is expected to be completed soon, President of Kazakhstan Kassym-Jomart Tokayev pointed out delivering the annual State-of-the-Nation Address. Construction of the gas distribution net will start in 2020 in Nur-Sultan city and Karaganda region, later on in Akmola and North Kazakhstan regions. As the President said, the Government allocates 56 billion tenge for these purposes. As a result, above 2,700,000 people will be provided with natural gas. Besides, some 250 billion tenge will be channeled for supplying people with drinking water and water discharge infrastructure, Kazinform reported.

EBRD allocates €300 million extra for Kazakh renewables The European Bank for Reconstruction and Development (EBRD) announced on 16 September it is extending up to EUR 300 million ($333 million) in additional funds to support renewable energy in Kazakhstan. The second phase of the Kazakhstan Renewables Framework, as the programme is named, will allow the country to promote more solar, wind, hydro, biogas, distribution and transmission projects. In all, the bank estimates that with its financial support the Central Asian country will be able to lower its carbon dioxide (CO2) emissions by at least 500,000 tons per year. This new loan also allows Kazakhstan to reach its goal of producing 3% of its total power from renewables by 2020 and 5% by 2050, EBRD said. The Green Climate Fund (GCF) is supporting this framework with concessional finance and a cooperation programme, which will help the country to enable competitive tendering for wind projects. The first phase of the programme financed 262 MW of renewable energy capacity across the country, the bank noted, Renewables Now reports.

Karaganda Region launches third solar power plant The Karaganda Region recently launched a 50-megawatt solar power plant in the village of Agadyr, Shetsky District. The Karaganda Region has become a leader in introducing renewable energy sources and the 50-megawatt plant is the region’s third solar power plant. “We have one goal. This is the instruction of Kazakhstan’s First President, Nursultan Nazarbayev, to increase the share of alternative energy in Kazakhstan up to 30%. And we

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are confidently moving towards this. Today, we are launching the third large solar power station in the region. This project is very significant for the development of industry in our region. By developing solar energy, we not only overcome the shortage of capacities, but also solve environmental issues,” said Regional Deputy Akim (Deputy Governor) Almas Aidarov. The solar plant occupies 125 hectares. Powerful substations and 150,000 solar panels were installed here. The construction of the Akadyr solar plant was financed by private German investor Solarnet Investment GmbH and supported by the regional akimat (administration) and Kazakh Invest. The project’s cost is $60.2 million, Kazinform news agency reports. “This is the second solar power station that we are launching in the Karaganda region. These projects were made possible thanks to the joint efforts of German investors, the regional akimat and Kazakh Invest,” said the main investor, Joachim Goldbeck. He said that already the capacity of the solar plant is 25 megawatts per hour. And a corresponding agreement was reached to expand the solar plant’s capacity up to 76 megawatts. At the beginning of this year, the Karaganda Region signed a memorandum with European investors on the development of alternative energy. In the future, this will provide another 500 megawatts of solar energy and $548 million of foreign direct investment. In the Karaganda Region two solar power stations are already operating in Saran and the village of Gulshat. Now all three sources can deliver almost 200 megawatts of green energy. Solarnet Investment GmbH is an international company specialising in the turnkey construction of photovoltaic plants at the commercial, industrial and large-scale level, The Astana Times reported.

Steel production down, copper up in Kazakhstan into 2019 Steel Production in Kazakhstan decreased to 350,000 tons in July from 385,000 tons in June 2019. Steel Production in Kazakhstan averaged 348,490 tons from 1992 until 2019, MINERAL reaching an all time high of 529,000 tons in March of 2004 and a record low of 165,000 RESOURCES tons in November of 2008, Trading Economics reports. Copper production in Kazakhstan increased to 42,980 tons in July from 38,913 tons in June 2019. Copper production in Kazakhstan averaged 32,678.01 tons from 2003 until 2019, reaching an all time high of 42,980 tons in July of 2019 and a record low of 17,401 tons in April of 2014.

Kazatomprom retains 20% reduction in uranium production for another two years In 2021, a 20% reduction in uranium production by all joint ventures in Kazakhstan, the press service of the Ministry of Energy of Kazakhstan reported with reference to the Minister of Energy of Kazakhstan Kanat Bozumbayev. According to the agency, this topic was discussed during a meeting between Minister of Energy Kanat Bozumbayev and representatives of the State Corporation Rosatom at the 63rd session of the General Conference of the International Atomic Energy Agency. “The parties discussed the results of measures taken to reduce uranium production in Kazakhstan in 2018-2020, which positively affected the price of uranium in the market. Today, Kazatomprom came up with an initiative to maintain in 2021 a 20% reduction in production by all joint ventures in Kazakhstan,” the Ministry of Energy said. The decision of Kazatomprom to maintain a reduction in production over the next two years is due to the fact that the uranium market is still recovering after a period of oversupply and uranium prices remain low. As the world’s largest producer of uranium, Kazatomprom is aware of the need to match global production with current demand. The implementation of this decision will lead to a reduction in supplies of up to 5,600 tons of uranium from the expected world production in 2021.

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The production volume of Kazatomprom in 2021 will remain at the level of less than 23,000 tons of uranium, which is expected to be in line with the figures for 2019 and 2020. NAC Kazatomprom is the national operator of Kazakhstan on the import and export of uranium, rare metals, nuclear fuel for nuclear power plants. Since 2009, Kazakhstan has been the world leader in natural uranium mining, In Business reports.

TRANSPORT & COMMUNICATIONS Russia, Kazakhstan to increase freight transportation Kazakhstan will increase volumes of freight traffic through Russia’s rivers. According to experts, the bilateral trade turnover between the countries would be increased as well. The increase in the trade shipment volume would become possible with the entry of the agreement on navigation between the member countries of Eurasian Economic Union. The agreement was signed on February 1 in Almaty during the Eurasian Intergovernmental Council session. According to the Union of Transport Workers of Kazakhstan, permit deadlines for passage along Russian waterways will be shortened. Previously, the process took six months to be completed. “According to the shipping navigation agreement, the decisions will be made by authorized bodies. In addition, the decisions have to be made within ten calendar days. As a result, this procedure has been greatly simplified,” said CEO of Union of Transport Workers of Kazakhstan, Yerlan Absatov. Experts pointed out that, first of all, by 2023 the agreement on navigation will increase the volumes of freight transportation along the Yertis River and Ural-Caspian waters. Based on forecasts, by 2023 the shipment would be raised from 55,000 to 350,000 tons along the Ural-Caspian waters. Transportation between Kazakhstan and Russia along the Yertis River could be increased to 500,000 tons, Russia Business Today reported.

Volume of traffic between Kazakhstan and China increases by 38% on-year On September 9, in Urumqi, China, the 28th Meeting of the mixed commissions of the railways of Kazakhstan and China was opened, which was headed by Kazakhstan Temir Zholy, Deputy General Director for Marketing and Integrated Planning of KTZ-Freight Transportation Mukhtar Makhambet, the Chairman of the Board of Urumqi Railway, Zhang Haitao. During the opening of the meeting, the parties noted the established work of the international border crossings of Kazakhstan and China. Separately, the activity of the Dostyk-Alashankou border crossing was noted, which increased the reception of trains on a wide gauge to 14 pairs per day. Also summed up the work for 2018. The volume of traffic between Kazakhstan and China amounted to 13,979 thousand tons, 38% more than in 2017. For 8 months of 2019, with a plan of 9,827 thousand tons, 10,882 thousand tons of cargo were transported, 11% more than planned. Further, the parties identified the main issues that will be considered during the meeting, including amendments and additions to the Protocol of the mixed commissions of the border railways of Kazakhstan and China; plans to fulfil the volume of traffic between Kazakhstan and the PRC by the end of 2019; the preliminary plan for the volume of traffic for 2020; measures to strengthen infrastructure between border stations; loading goods in containers and container trains of the China-Europe, China-Central Asia ring route and other issues, Kazakh Zerno reported.

Nokia is ready to invest $500 million in 5G in Kazakhstan Minister of National Economy Ruslan Dalenov said that Nokia is ready to spend $500 million to introduce a 5G network in Kazakhstan. The project is being developed by agreement with the Nordic Investment Bank.

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“5G is the connection of a new generation. You probably heard, when a surgeon sitting in Tokyo drove a scalpel around his screen, and on the other side of the planet the robot performed an operation on a patient. To do this, the speed should be just frantic. 5G allows it. Today, all countries are implementing it. This is a very expensive connection. Big investment required. Now such a project is being developed by Kazakhinvest. Who will we take a loan from, when will we take it, and under what conditions will everything be determined in the process of negotiations,” the Minister said. In May this year, Prime Minister Askar Mamin announced that by the end of the year, 5G communication will appear in three cities of Kazakhstan, Almaty, Nur-Sultan and Shymkent, ProfIT reported.

AGRICULTURE Construction of poultry farms, greenhouses and dairy farms are major projects for Kazakhstan’s agriculture The main drivers of agriculture may be KazAgro-funded high-tech projects, the press service of the holding said. The holding began to engage in projects with high added value since 2007. According to the results of 2018, 702 projects with a total value of 524 billion tenge were collected in the national holding's portfolio. Of these, 600 projects are successfully working, the rest are at the implementation stage. In 2018, investment projects produced products worth 222 billion tenge and created more than 19 thousand jobs. “Investment projects are characterised by high labour productivity, which amounts to 2.2 million tenge. This is higher than the industry average, since in general in agriculture this indicator does not exceed 1.9 million tenge per employee. Working with high-tech projects is very important to us. Along with improving export potential, projects give more multiplicative effect,” Yerbol Karashukeyev, Chairman of the Board of KazAgro, said. Already at the end of this year, 29 poultry farms financed by the holding will produce about a billion eggs a year, 165 thousand tons of poultry meat. 61 dairy farms will produce 234 thousand tons of milk and dairy products per year. 52 greenhouses cultivate about 75 thousand tons of vegetables per year, Kazakh Zerno reports.

Agricultural production in Kazakhstan in January-August increases by 3.6% Agricultural production in Kazakhstan in January-August 2019 amounted to 2.035 trillion tenge, which is 3.6% more than in the same period in 2018. Livestock products were produced at 1.438 trillion tenge with an increase by 3.5%, crop production at 577.3 billion tenge with an increase by 3.9%, the Statistical Committee of the Ministry of Economy reported. As of September 1, 2019, an increase in the number of cattle by 4.9% was recorded compared to the same date in 2018, up to 8 million 46.5 thousand heads. The number of pigs increased by 3.6%, to 944.4 thousand heads, horses by 8.5%, up to 2 million 905.7 thousand heads, sheep by 2.3%, up to 19 million 554 thousand heads , poultry by 4.5%, up to 46 million 211.1 thousand heads. The number of goats decreased by 0.8%, to 2 million 625.7 thousand heads, In Business reports.

Kazakhstan allocates more than 200 billion tenge on increasing irrigated land Financing to restore the area of irrigated land in Kazakhstan amounts to about 218.5 billion tenge and $316 million. Earlier, President Kassym-Zhomart Tokayev announced the need to increase the irrigated area to 3 million hectares by 2030. The Ministry of Agriculture reported that since 1991 this figure has decreased from 2.3 million hectares to 1.4 million hectares.

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“From 2017 to 2021, it is planned to restore irrigation systems of regular irrigation lands on 610 thousand hectares,” the Ministry of Agriculture added. The Ministry explained that the increase in area will occur in 11 regions. The majority accounts for Almaty and Turkestan regions. $316 million of loans from the Islamic Development Bank and the European Bank for Reconstruction and Development were attracted to restore 127 thousand hectares. 256 thousand hectares are proposed to be realised with the help of 118 billion tenge of loans of microfinance organisations under the state guarantee, and 167 thousand hectares are expected to be restored with the help of 77 billion tenge of public-private partnership. The remaining 51 thousand hectares will be restored at the expense of local executive bodies and other private investments of 23.5 billion tenge. “By attracting loans from IDB and EBRD, projects are already underway to restore irrigation and drainage systems on an area of 128 thousand hectares in Almaty, Aktobe, Zhambyl and South Kazakhstan regions for 102 billion tenge. Implementation period is until 2021,” the Ministry of Agriculture added. Together with the EBRD, the condition of the lands in Turkestan, Zhambyl and Aktobe regions is improving. The project cost is 60.1 billion tenge, and the size of the area is 92.6 thousand ha. 136.4 thousand hectares of land and drainage in Almaty and Turkestan regions are being restored together with IDB. 53.24 billion tenge were allocated there. The Ministry of Agriculture explained that due to projects in 2017, 15 thousand hectares were introduced, and 65 thousand hectares in 2018. In 2019, it is planned to increase the area of irrigated land by 124 thousand hectares, in 2020 by 187 thousand hectares, in 2021 by 219 thousand hectares, LS reported.

Ministry of Agriculture of Kazakhstan reduces the forecast of grain yield to 18-18.5 million tons Due to weather conditions, the forecast for grain yield has been reduced to 18-18.5 million tons, Minister of Agriculture Saparkhan Omarov told on the sidelines of a government meeting on Monday. “According to current information, we have collected 1.2 million less. But the final figures will show, when we fully harvest. Harvesting is still underway. To date, we have harvested 70% of the crop .... We expect harvest somewhere in the region of 18-18.5 million,” Omarov said. He also noted that the weather is good so far, so cleaning is planned to be completed according to the plan before the end of September. Earlier, the Ministry of Agriculture said that they expect the harvest of 2019 at the level of 2018, and this is 20.3 million tonnes. Reported by Kazakh Zerno.

ADB facilitates agro-irrigation project in Kazakhstan The Asian Development Bank (ADB) has approved a $249.8 million equivalent loan in local currency (tenge) to the Republican State Enterprise Kazvodkhoz (KVK), a state-owned enterprise dealing with water facilities, to help in the rehabilitation and improvement of irrigation networks serving 171,000 hectares (ha) of land in four provinces in Kazakhstan. The loan, guaranteed by the Government of Kazakhstan, will improve the country’s agricultural productivity and promote the diversification of agricultural products from traditional low-yielding and low-value crops into high-value cash crops. The four provinces under the project are East Kazakhstan, Karaghandy, Kyzylorda, and Zhambyl, a press release from the ADB reads. “Agriculture is an important part of Kazakhstan’s economy, employing 18% of the labor force and contributing 4.4% of the country’s gross domestic product (GDP). However, the sector’s contribution to the country’s economy has been decreasing,» said ADB Principal Water Resources Specialist for Central and West Asia Mr. Yaozhou Zhou. «Making sure

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ECONOMIC NEWSLETTER, September 2019 Embassy of the Kingdom of the Netherlands

that reliable irrigation water is available will help to realize the agriculture sector’s potential to further contribute to the country’s growth and development.” The project will rehabilitate and improve about 245 irrigations schemes in the four provinces, which will include the desilting, re-sectioning, and repairing damaged sections of line canals. The total length of new concrete-lined canals will be about 1,064 kilometers (km), while 1,976 km of earth canals will be improved. Other infrastructure works include the construction and rehabilitation of about 4,185 hydraulic structures, including water measuring devices; improvement of 358 km of drainage collectors; establishment of a drip irrigation system covering 9,300 ha in Zhambyl; and the installation of 24 supervisory control and data acquisition system in all project areas. Apart from capacity building efforts that includes assistance to agriculture cooperatives, the project will also pilot a system to monitor water and agricultural productivity using remote sensing technology in selected irrigation systems. The project will help improve KVK’s capacity for tariff planning and financial sustainability, and extend its advisory services to farmers regarding on-farm water management and crop choices. Total cost of the project is $320.88 million equivalent, with KVK contributing $71.08 million in financing. The project is expected to be completed in mid-2025. ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region, Kazinform reported.

Kazakhstan’s farmers spend 8.5 billion tenge per year on fertiliser imports Up to 8.5 billion tenge are annually spent by Kazakh farmers to purchase imported herbicides and pesticides. 12 domestic fertiliser plants cover the needs of the domestic market by only 40%. Therefore, it is necessary to attract investors and build new factories in Kazakhstan, President Kassym-Zhomart Tokayev said at a meeting with farmers. According to the head of state, today, domestic farmers use an average of about 5 kg of fertiliser per hectare, when in Russia this figure is 40 kilograms, and in Europe and the USA from 400 to 700 kg. The President of Kazakhstan said, it is necessary to increase the domestic production of fertilisers, agricultural products. Saturate the domestic market with them. This work should be carried out with the involvement of foreign investors. It is necessary to come up with a proposal, to build ready-made, licensed plants for the production of fertilisers and pesticides in Kazakhstan. Meanwhile, the plant for the production of mineral fertilisers in Zhambyl region exports up to 72% of its products to 33 countries. This year the enterprise was modernised and its capacity increased from 300 thousand tons per year to 500 tons. Only about 30% of these products are supplied to the domestic market, In Business reports.

Iranian investors help launch meat processing plant in Kazakhstan In Almaty region, a meat processing complex worth 3.2 billion tenge was launched. According to information, a new production was launched in Zhambyl district. “The volume of investment in the project of an Iranian businessman is 3.2 billion tenge. The construction of the Empire Food complex began in September 2016, the area of the meat processing plant is 6.9 thousand square metres. The number of created jobs is 98 people,” the statement said. The capacity of the plant is 1 thousand heads of sheep and 120 heads of cattle per shift, the boning department is 20 tons. The Ministry of Agriculture noted that a by-product processing line has been established corresponding to the slaughter volume. “In test mode, after the completion of construction, 332 tons of meat and meat products were produced using the installed equipment. 73 tons of products worth $452,000 were exported to Iran and the Persian Gulf countries,” the department explained.

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ECONOMIC NEWSLETTER, September 2019 Embassy of the Kingdom of the Netherlands

It is expected that by the end of the year 640 tons will be exported. In addition, there are intentions to supply meat to China. Iranian investors also plan to finance a meat processing plant with subsequent deep processing in the territory of the Endіrіs industrial zone in Semey. The project cost is estimated at 4.55 billion tenge. The investors are the Kazakh-Iranian company Agro Portal and the Iranian company Marzhay Aria Tejarat CO L.L.C.EG, LS reported.

Feeding platform launched in Turkestan region of Kazakhstan Nurym Group commissioned a feedlot in Turkestan region. The cost of building a feedlot located in the rural district of Mankent amounted to 961 million tenge. The capacity of the enterprise is 6 thousand heads of cattle, the regional Department of Agriculture reported. Nurym Group was established in 2015. The main activity of the company is raising cattle for meat, In Business reports.

Poultry farm worth 800 million tenge to be commissioned in Akmola region of Kazakhstan Blic Terminal plans to commission a poultry farm worth 800 million tenge in Akmola region. The capacity of the poultry farm, which will be commissioned by the end of 2019, will be 2,500 tons of meat per year. Blic terminal was founded in 2009. The main activity of the company is the production of refined oils and fats, and various other activities. Earlier, the Prime Minister Askar Mamin visited Akmola region on a working trip, where he reviewed the preparations for the upcoming XVII Forum of interregional cooperation between Kazakhstan and Russia in 2020. The head of government was informed about the implementation of investment projects in the field of agriculture. In 2019, it is planned to implement 10 investment projects in the region for a total of 10.3 billion tenge. The first stage with a capacity of 25 thousand tons of chicken meat per year was launched at the Makinsk poultry farm. In 2020, the second phase will be commissioned, which will increase production to 50 thousand tons, Kapital reports.

NAALE Chinese company to build sugar plant in Pavlodar In the framework of the VI session of the Kazakh Chinese Business Council the parties have agreed to construct a sugar plant in 2020-2022. The relevant document was signed by Bulat Bakauov, Governor of Pavlodar region, and Zhang Qi chairman of NAALE Group. The investor plans to build a sugar plant with the production capacity not less than 110 thousand tons of sugar per year. The authorities of the region will be responsible for all the issues of engineering and communications infrastructure necessary for the construction of the plant. In addition, investors can count on all available measures of state support in terms of preferential taxation and investment subsidies. Within a year after the signing of the framework agreement the NAALE management intends to open the company’s office in the city of Pavlodar and begin to implement the project. Akim of Pavlodar region concluded another cooperation agreement with the government of Fuqing City, Fujian Province. According to the agreement the parties will participate in the construction of the Kazakh-Chinese international agro-industrial park in the framework of “Belt and Road” cooperation, Kazinform reported.

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ECONOMIC NEWSLETTER, September 2019 Embassy of the Kingdom of the Netherlands EXHIBITIONS IN KAZAKHSTAN (October 2019)

Kazakhstan Security Systems International Security and Civil Protection Exhibition 1 – 3 October 2019, Nur-Sultan Organizer: Astana Expo KS www.astana-expo.com

Powerexpo Almaty Kazakhstan International Energy, Electrical Equipment and Machine Building Exhibition 23 – 25 October 2019, Almaty Organizer: Iteca www.powerexpo.kz

KAZTYREEXPO International Exhibition of Tyres and Tyre Fitting Equipment 17 – 19 October 2019, Nur-Sultan Organizer: Iteca www.kaztyre.kz

KazAgro Kazakhstan International Exhibition for Agriculture and Food Industry 23 – 25 October 2019, Nur-Sultan Organizer: Expo Group www.expogroup.kz

KazFarm Kazakhstan International Exhibition for Cattle Breeding, Meat and Dairy Sectors 23 – 25 October 2019, Nur-Sultan Organizer: Expo Group www.expogroup.kz

Astana Zdorovie 2019 Kazakhstan International Exhibition on Healthcare 24 – 25 October 2019, Nur-Sultan Organizer: Iteca www.astanazdorovie.kz

Exhibitions dates are subject to change. For a complete overview and more information on exhibitions in Kazakhstan, please visit: www.iteca.kz www.expocentralasia.com www.tntexpo.kz www.atakentexpo.kz http://10times.com/

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ECONOMIC NEWSLETTER, September 2019 Embassy of the Kingdom of the Netherlands CONTACTS

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