Economic Newsletter on Kazakhstan |January 2020

CONTENTS MACRO-ECONOMICS & FINANCE ...... 2 ENERGY & NATURAL RESOURCES ...... 4 TRANSPORT & COMMUNICATIONS...... 8 AGRICULTURE ...... 9 EXHIBITIONS IN KAZAKHSTAN (January-March 2020) ...... 14 CONTACTS ...... 15

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, January 2020 Embassy of the Kingdom of the Netherlands MACRO-ECONOMICS & FINANCE Kazakhstan’s GDP grows by 4.5% in 2019 Nursultan Nazarbayev met with Prime Minister Askar Mamin. Askar Mamin spoke about the current socio-economic situation in Kazakhstan and the measures taken to increase the well-being of the people. Nursultan Nazarbayev, in turn, focused on the importance of the quality implementation of the points of the 100 concrete steps Plan of the Nation for the implementation of the Five Institutional Reforms. “The situation in the economy is not bad. Now it’s important to carefully approach the implementation of the 100 concrete steps Plan of the nation. There are completed tasks, but there are also unfulfilled items that require attention,” Nursultan Nazarbayev said. Askar Mamin presented information on the achievement of key indicators of economic development in 2019 and plans to further strengthen the national economy. “The country’s economy is developing stably. We have achieved high economic indicators. In accordance with the indicators of 2019, GDP growth amounted to 4.5%. The main drivers are construction, transport, trade, communications,” the Prime Minister said. The construction industry grew at 12.9%, trade at 7.6%, communications at 5.2%, transport at 5.1%, manufacturing at 4.4%, and mining at 3.7%. Real incomes of the population grew by 5.5%, investment in fixed assets grew by 8.5%, commodity circulation amounted to $97 billion, Kapital reported.

World Bank expects Kazakhstan’s economy to grow by 3.7% Kazakhstan’s economic growth this year is expected to reach 3.7%, with reference to the World Bank. According to the report, Outlook for the World Economy for January 2020, the previous forecast was 3.2%. “Economic growth in 2020 will be at the level of 3.7%, in 2021 at 3.9%, and in 2022 at 3.7%,” the document says. In addition, the World Bank noted that low rates of economic growth will remain in developing countries and emerging market countries. “Politicians should take the opportunity to pursue structural reforms. Measures to improve the business climate, strengthen the rule of law, improve debt management and increase productivity can help ensure sustainable economic growth,” the Vice President of the World Bank’s Equity, Finance and Institutions Group Ceyla Pazarbasioglu said. According to the report, in the region of Central Asia and Europe it is expected to strengthen economic growth this year to 2.6%. However, this option is feasible only if prices for basic commodities are stabilised, growth in the euro area and the economic growth rates of Turkey up to 3% and Russia up to 1.6% are restored. Armenia and Kyrgyzstan bypassed Kazakhstan in terms of GDP growth, LS reported.

EBRD boosted investment in Kazakh economy by 40% in 2019 The European Bank for Reconstruction and Development (EBRD) invested $761 million in Kazakhstan in 2019 or up 40% year-on-year. Investments in 2019 targeted 29 projects in the public and private sectors. Last year, the EBRD Board of Directors approved a second phase of the bank’s Kazakhstan Renewables Framework of up to €300 million and a financing package for the construction of the 66-km Almaty Big Ring Road. The bank also allocated funds for the road repairs in several regions, construction of the solar power plants, as well as provided financial support for the SMEs and women entrepreneurs. To date the EBRD has invested over $8.4 billion in more than 269 projects in Kazakhstan. In addition, since 1 February 2020 André Küüsvek will be a new EBRD Managing Director for Central Asia replacing at this position Bruno Balvanera, according to Interfax-Kazakhstan.

Kazakhstan’s international reserves grow in December by 2.1% According to preliminary data, Kazakhstan’s international reserves, including the gross reserves of the National Bank and the National Fund, amounted to $90.974 billion as of BANKING December 2019. As of the end of November, Kazakhstan’s international reserves 2

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

amounted to $89.094 billion, at the end of 2018 to $88.915 billion, the press service of the National Bank reported. Thus, in December, Kazakhstan’s international reserves grew by 2.1%, and in 2019 by 2.3%. The gross international reserves of the National Bank amounted to $29.033 billion in December, with an increase by 1.38% on-month. Since the beginning of the year, the gross international reserves of the National Bank decreased by 6.12%. The assets of the National Fund at the end of December amounted to $61.941 billion, with an increase by 2.45% on-month, by 6.82% from the beginning of the year. Net international reserves of the National Bank in December increased by 1.39%, amounting to $28.547 billion. Since the beginning of the year, the net international reserves of the National Bank decreased by 6.21%. Assets in foreign currency in December 2019 amounted to $10.157 billion, having decreased by 5.53% on-month, and by 38.57% since the beginning of the year. Assets in gold over the past month increased by 5.54%, by 31.16% from the beginning of the year increased, amounting to $18.875 billion, according to In Business.

National Bank of Kazakhstan develops a draft Monetary Policy Strategy until 2030 To increase the effectiveness of monetary policy, meet inflation expectations and ensure long-term funding of the economy, by the end of March this year a draft Monetary Policy Strategy until 2030 will be developed. This was announced at a government meeting by the Chairman of the National Bank, Yerbolat Dosaev. “After discussion with the expert community and coordination with interested state bodies, the project will be submitted to the Board of the National Bank before July 1 of this year,” he said. Also, in March this year, an Agreement between the Government, the National Bank and the Agency for Regulation and Development of the Financial Market to coordinate macroeconomic policies will be concluded. The document will reflect the continuation of work begun in 2019 on coordinating macroeconomic policies and developing approaches to ensuring a balance between the stability of the financial system and the need for general economic development. “In the Agreement, measures to increase competition in the food markets and effective control of tariffs for regulated services, issues of developing the market for government securities and issuing mainly 2-5-year bonds, efforts to further diversify exports and import substitution, continued work to improve bankruptcy procedures, in particular the principle of one tenge - one vote, as well as limiting the time of the bankruptcy procedure to increase its effectiveness, should be reflected,” he emphasised. In the framework of ensuring balanced development of the foreign exchange market and attracting foreign capital to Kazakhstan, the National Bank together with the Agency for Regulation and Development of the Financial Market will make proposals on the development of a market infrastructure for hedging currency risks by July 1, 2020. “This, on the one hand, will allow redirecting foreign currency funds on the balance sheet of financial organisations to lending to the economy in national currency. On the other hand, there will be an instrument of protection for foreign investors from currency risks, which, ultimately, will help bring the volume of investments in fixed assets to 30% of GDP,” he emphasised. The speaker shared measures to combat the shadow economy and increase the share of cashless payments. To achieve its goals, the National Bank, together with the Agency for Regulation and Development of the Financial Market and the Government, will develop a National Payment System Development Program by October 1, 2020. “The national payment system will be built on a mutually beneficial basis for all interested parties,” he said. The National Bank together with the Agency for Regulation and Development of the Financial Market will develop a draft Concept for the Development of Financial Technologies and Innovations for 2020-2025 by July 1, 2020.

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“As noted by the head of state, attracting direct investment is a key tool for country development. To get a clearer picture, starting in April 2020, the National Bank will quarterly publish statistics on foreign direct investment inflows without taking into account the oil and gas industry. Coordination of all measures to ensure financial stability and further reforms of the financial sector will be ensured through the created Financial Stability Council in accordance with the decree of the head of state,” he added, Kapital reported.

ENERGY & NATURAL RESOURCES Kazakhstan’s oil sector receives more than $57 billion investment The cost of the main investment projects in the oil sector of Kazakhstan reached $57.8 billion. All these investments will be received by the projects during implementation until 2025. The department noted that 75.8 thousand jobs were created due to them. Meanwhile, the department divided investment projects into four. Three of them concern large deposits of the country. Thus, the project for the future expansion of Tengiz accounts for $36.8 billion. According to Chevron forecasts, FEP expenditures can grow to $45.2 billion. For stage I of the expansion of Kashagan, $2 billion will go, and $4.5 billion for projects to extend the level of production at Karachaganak. In addition, maritime projects in Isatay, Abay, Zhenis and Zhambyl were noted. Investments in them amount to $14.5 billion. The forecasted number of jobs reaches 2 thousand. Earlier, Energy Minister Nurlan Nogaev voiced ambitious plans for Kazakhstan’s petrochemical projects, LS reported.

Kazakhstan produces over 90.5 million tons of oil and gas condensate in 2019 According to preliminary data, oil and gas condensate production in Kazakhstan in 2019 amounted to 90.5 million tons, the press service of the Ministry of Energy of Kazakhstan reported. “Tengizchevroil accounts for 29.79 million tons, Karachaganak Petroleum Operating B.V. for 11.27 million tons, North Caspian Operating Company N.V. for 14.1 million tons,” Ministry of Energy reported. Earlier, the Ministry of Energy raised the forecast for annual production, taking into account the growth in production rates in the country, from 89 million to 90.5 million tons of oil per year. He also announced a record level of oil production at the Kashagan field in the Caspian Sea. Kazakhstan supported an additional reduction in oil production by 500 thousand barrels per day until the end of the first quarter of 2020 under the OPEC+ Agreement, Sputnik Kazakhstan reported.

Kazakhstan carries out repairs at three oil fields in 2020 In 2020, Kazakhstan will carry out repairs at three major oil fields of the country, Tengiz will reduce oil production, the press service of the Ministry of Energy reported on 28 January. According to the schedule of the Ministry of Energy, repair work will be carried out twice at Kashagan, from June 16 to June 23 and from August 18 to November 5, at Tengiz from August 1 to September 15, and at Karagchanagak from September 15 to October 9. “All repair work will be carried out without stopping production,” the press service said. As a result, oil production at Kashagan is expected to increase to 15.5 million tons from 14.1 million tons in 2019, at Karachaganak to 11.7 million tons from 11.3 million tons last year.

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A decrease in production is expected in Tengiz to 28.5 million tons from 29.8 million tons in 2019. In 2020, Kazakhstan plans to produce just over 90 million tons of oil, according to Reuters.

Sparrows swoops on Tengiz deal in Kazakhstan Aberdeen headquartered Sparrows Group has secured a five-year contract with the Chevron-led Tengizchevroil (TCO) joint venture to deliver specialist lifting inspection services for the Tengiz field in Kazakhstan. Sparrows will conduct pre-mobilisation and annual inspections for mobile cranes, gantry cranes, forklifts and boom trucks. The company’s engineering teams will also manufacture custom-built wire rope slings to suit TCO’s operational and drilling requirements. The operator’s onsite rigging and lifting workshop will be operated by Sparrows personnel for the duration of the project. Manpower, equipment rental, turnarounds and special projects will all be delivered from the workshop, located in the industrial base of the Tengiz field. The company currently has 40 personnel dedicated to the project but expects this to increase as the project develops. “We have continued to see demand for our services increase in Kazakhstan as operators understand the long-term benefits strategic inspection and maintenance campaigns can deliver for their fields,” Stewart Mitchell, Sparrows chief executive officer, said. The Tengiz field is an onshore reservoir located in north-west Kazakhstan which is ranked as the world’s deepest producing supergiant oilfield and the largest single-trap producing reservoir in existence. TCO is a joint venture between Chevron, ExxonMobil, KazMunayGas and LukArco. Sparrows has worked with the operator since 2004 and this latest award will extend their relationship to 20 years, the company said.

Chinese company builds gas processing plant in Kazakhstan on Kashagan The Chinese company China Oil HBP Science & Technology has won a project to build a gas plant at the Kashagan field. According to the publication, the project cost is $242 million. The capacity of the future natural gas processing plant is estimated to reach 1 billion tenge. The implementation is planned to last two years. During this time, HBP will provide a detailed design of the project and all attachments, plus guidance on installing the equipment and commissioning the project. The processing plant itself is the first stage of the expansion of the Kashagan project. The second stage, which is now planned, will increase the throughput to 4 billion cubic metres per year, LS reported.

Kazakhstan exports over 55 million tons of oil through CPC in 2019 In 2019, the export of Kazakhstani oil through the Sea Terminal of the Caspian Pipeline Consortium amounted to more than 55 million tons. It is reported that in 2019, 63,256,105 tons of gross oil was shipped from the CPC Offshore Terminal, which was 2,172,074 tons higher than the results of 2018 and set a new record for the annual shipment of the CPC oil port. Shipment was carried out most intensively in the past year in December. 5,834,854 tons or 46,270,277 barrels were transferred to the tanks of oil vessels that month. 56 tankers departed from the outboard berthing devices, which allowed recording the annual figure at 597 vessels. Out of the more than 63 million tons of oil shipped from the Sea Terminal in 2019, 55,841,511 tons of oil were delivered by Kazakhstan shippers. The largest volumes of oil in the CPC pipeline system in 2019 came from the Tengiz, Karachaganak, and Kashagan fields at 29,893,404 tons, 10,078,817 tons and 14,120,228 tons of oil, respectively. Russian partners shipped 7,414,594 tons.

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The CPC pipeline system is one of the largest investment projects in the energy sector with the participation of foreign capital in the CIS. The length of the Tengiz-Novorossiysk pipeline is 1,511 km. This route transports more than two-thirds of Kazakhstan’s total export oil, as well as raw materials from Russian fields, including those located in the Caspian. The CPC marine terminal is equipped with three remote berthing devices allowing safe loading of tankers at a considerable distance from the coast, including under adverse weather conditions, according to Kazinform.

Caspian Pipeline Consortium plans to increase oil export by 3% to 65 million tons in 2020 In 2020, the Caspian Pipeline Consortium plans to increase export pumping of CPC Blend oil to 65 million from 63.3 million tons in 2019, the company’s press service reported. “The forecast is based on preliminary applications from shippers,” the consortium said. CPC is increasing exports by increasing oil production in large fields of Kazakhstan, as well as deliveries from the Caspian fields of Lukoil. Shareholders do not plan to change the tariff for pumping oil through the pipeline. Last year, CPC increased oil transportation to a record 63.3 million tons from 61.1 million tons in 2018. The consortium intends to increase throughput by almost a quarter to 83 million tons of oil by the end of 2023, according to Reuters.

Scotland’s Sparrows clinches subcontractor deal with Tengiz consortium, Kazakhstan Aberdeen headquartered Sparrows Group has secured a five-year contract with the Chevron-led Tengizchevroil (TCO) joint venture to deliver specialist lifting inspection services for the Tengiz field in Kazakhstan. Sparrows will conduct pre-mobilisation and annual inspections for mobile cranes, gantry cranes, forklifts and boom trucks. The company’s engineering teams will also manufacture custom-built wire rope slings to suit TCO’s operational and drilling requirements. The operator’s onsite rigging and lifting workshop will be operated by Sparrows personnel for the duration of the project. Manpower, equipment rental, turnarounds and special projects will all be delivered from the workshop, located in the industrial base of the Tengiz field. The company currently has 40 personnel dedicated to the project but expects this to increase as the project develops. “We have continued to see demand for our services increase in Kazakhstan as operators understand the long-term benefits strategic inspection and maintenance campaigns can deliver for their fields,” Stewart Mitchell, Sparrows chief executive officer, said. The Tengiz field is an onshore reservoir located in north-west Kazakhstan which is ranked as the world’s deepest producing supergiant oilfield and the largest single-trap producing reservoir in existence. TCO is a joint venture between Chevron, ExxonMobil, KazMunayGas and LukArco. Sparrows has worked with the operator since 2004 and this latest award will extend their relationship to 20 years, the company said, Upstream reproted.

Construction of a desalination plant in Mangystau region of Kazakhstan begins Construction of a desalination plant in the Kenderli recreation area in Mangystau region is scheduled to begin in 2020, the press service of the national company KazMunayGas told Interfax-Kazakhstan. “A feasibility study is currently underway for the construction of a desalination plant for the Kenderli recreation area. The cost of the project will be determined after the final development of the feasibility study,” the KMG press service said. The estimated implementation period for this project is 2020-2022. According to a press release from KMG, Ozenmunaygas and KMG Engineering, subsidiaries of the KazMunayGas national

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company, signed a memorandum of understanding and cooperation with the Administration of Zhanaozen in Mangystau region. “The signed document provides for the re-qualification of the feasibility study being developed by KMG Engineering for the construction of a desalination plant as a social project, according to the protocol order of the Prime Minister of Kazakhstan Askar Mamin of September 18, 2019. Accordingly, the terms of reference for water quality meeting the requirements and standards for long-term supply of drinking water to the population of the city of Zhanaozen,” the report said. The desalination plant is planned to be built at the expense of KMG. “The estimated capacity will be 50 thousand cubic metres of water per day. Currently, Zhanaozen is supplied with drinking water at a distance of 2,000 km by transporting the Volga water from the Kigach River. The problem of providing water in Mangystau region is especially acute, since the region is located in a semi-desert area with limited water resources,” the information explained, In Business reported.

Fourth solar power plant launched in Karaganda region of Kazakhstan A new green project appeared near Zhezkazgan, in the village of Kengir. The fourth solar power plant in the region with a capacity of 10 MW was commissioned in December last year. Over an area of 20 hectares, 29,436 solar panels have been installed. They are capable of producing 14 million kWh per year. Governor of Karaganda region Zhenis Kasymbek during a working trip to Zhezkazgan visited the solar power plant and said that 2019 was a breakthrough year for the region in introducing alternative energy sources. “By developing solar energy, we not only overcome the shortage of capacities, but also solve environmental issues, and our region becomes the leader in the development of renewable energy sources,” Zhenis Kasymbek said. The first three such power plants were built in Sarani, the villages of Gulshat and Agadir. The largest of them is Saranskaya with a capacity of 100 MW. In total, more than 60 billion tenge of private investment has been invested in the construction of all solar stations in Karaganda region. The new solar station in Kengir is fully automated. In total, 10 people work here. The facility was built through private investment. The generated electricity will be distributed in the networks of Zhezkazgan Distribution Electric Grid Company, Kapital reported.

New aluminium processing plant opened in Ekibastuz In Pavlodar region they can arrange the production of ferrosilicon aluminium for 6 billion tenge. This was reported in the regional department of industrial and innovative MINERAL development. RESOURCES They plan to implement the new project in Ekibastuz. As explained in the management, investors have already been offered two plots in the industrial zone. The estimated cost of the project is estimated at 6 billion tenge. The implementation period is 2020-2021. The capacity of the new enterprise will be 250-300 thousand tons of products per year. It is noted that the implementation of the project will be discussed after the investor’s repeated visit. The meeting is expected to take place in the first quarter of 2020. Ekibastuz also wants to build a plant for the production of technical silicon for $300 million. Ferro-silicoaluminium is a complex ferroalloy, which consists of silicon and aluminium. This alloy is used in ferrous metallurgy, according to LS.

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TRANSPORT & COMMUNICATIONS Growth of transit container traffic in Kazakhstan is expected to reach 15-20% in 2020 In 2019, rail freight turnover between China and Kazakhstan amounted to 17.6 million tons, which is 25% higher than in 2018. The subsidiary of KTZ NC, KTZ Express, has outlined a work plan for 2020 with Chinese partners. In general, the parties forecast further positive dynamics and an increase in transit container traffic by 15-20% in 2020 compared with the figures for 2019, the press service of Kazakhstan Temir Zholy reported. The management of KTZ Express held a series of negotiations with the state logistics platforms of Xi’an from China and the management of CRIMT and CRCT subsidiaries of Chinese Railways. During the meetings, the parties summed up the cooperation in 2019 and discussed plans for 2020 for container transportation through the trans-Kazakhstan corridors in the directions China-Europe-China, China-Central Asia-China and China-the Trans-Caspian International Transport Route-China. In addition, the planned growth of transportation in the directions China-Russia/Belarus- China through the territory of Kazakhstan this year was discussed. Partners of KTZ Express noted a positive dynamics in the growth of traffic through the territory of Kazakhstan in comparison with alternative destinations. “The increase in transportation along the trans-Kazakhstan routes is primarily due to favourable tariff conditions, as well as the high quality of service provided by the group of companies of KTZ NC,” Madina Akhmetzhanova, Deputy General Director for Sales of KTZ Express, said. In 2019, rail freight turnover between China and Kazakhstan amounted to 17.6 million tons, which is 25% higher than in 2018. More than 6.8 million tons of cargo was received from China, which is 24% higher than the same indicator in 2018. 10.8 million tons were shipped from Kazakhstan to China. The growth compared to the previous year amounted to 26%, In Business reported.

Transit of goods through Kazakhstan grew 23% in 2019 The transit of goods through Kazakhstan grew 23% to 664,000 containers and total transit revenues for Kazakhstan reached more than 450 billion tenge ($1.2 billion) in 2019, the Ministry of Infrastructure and Industrial Development reported on 20 January. Among this cargo, the number of containers in the direction of China – Europe – China increased 11% to 347,000 TEU containers. Approximately 17.5 million tons of goods transited through Kazakhstan in 2019. Of that, 75.6 percent or 11.5 million tons were in route to Central Asian countries. In particular, cargo to Uzbekistan totaled 7.1 million tons, to Kyrgyzstan 2.26 million tons, to Tajikistan 1.2 million tons and to Afghanistan 0.26 million tons. Outside of Central Asia, cargo to Russia accounted for 2.8%, China 13.8% and European Union countries 7.1%. Specific types of cargo transported through Kazakhstan via railway include oil at 18.5%, ferrous metals at 10.7%, chemicals and soda at 6.8%, chemical and mineral fertilizers 2.2%, grain at 1.7% and other types of cargo totaling 55.6%. The volume of transit goods transported via roads amounted to 1.93 million tons. The main directions of the road transit were as follows: from China to the countries of the European Union at 14,000 tons, to Central Asian countries 779,000 tons and to Russia 61,700 tons of cargo. Cargo originating in Central Asian nations included 106,500 tons to the European Union, 396,000 tons to Russia and 5,400 tons to China. Approximately 9,700 tons of cargo were delivered from Russia to the countries of Central Asia, 567,000 tons from the countries of the European Union to Central Asia and 2,700 tons of cargo to China.

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Goods transported via road consisted primarily of automobiles and equipment. Of that, electronic equipment accounted for 20.1% of transit, plant products 17.3%, consumer goods 15%, raw materials, fabrics and textile materials 11.5% and other goods 8.6%, the Astana Times reported.

Over 25 000 km of roads to be repaired in Kazakhstan until 2025 At the end of 2019, the quality index of local roads reached 71%. Last year, in the regions of the country, the share of roads in good and satisfactory condition was 68%, according to the RK MIID. In 2019, much attention was paid to the development of roads of regional and district significance, more than 200 billion tenge was allocated. “At the expense of these funds throughout the republic during this period 386 projects were implemented: 37 for construction, 34 for reconstruction, 60 for overhaul and 255 for medium repairs. 4,617 km were repaired. Thus, according to the results of the year, the share of roads of regional and district significance in good and satisfactory condition amounted to 71%,” the report said. The leader in the number of projects in 2019 was the Mangystau region. Here, 5 reconstruction projects and 2 construction projects are being implemented. The region is the first in the ranking of road quality of the local network. 92% of the roads of regional and district significance is in good and satisfactory condition. “In 2020, the republic plans to cover over 4 thousand km with repair work, 350 road projects will be implemented and 75% of the local network roads will be improved to a good and satisfactory condition. Over the next 5 years, Kazakhstan will implement the Nurly Zhol state program for 2020-2025; it is planned to repair over 25 thousand km of roads and increase the share of local roads in good and satisfactory condition to 95%,” the ministry concluded, Kazakhstanskaya Pravda reported.

Kazakhstan to produce over 10 new car models in 2020 Kazakh Prime Minister Askar Mamin visited the national automotive pavilion, where he was briefed on development of Kazakhstan's automotive industry for 2020. In 2019, the share of the automotive industry in Kazakhstan's machine building sector was 26% with more than 50 thousand vehicles assembled with a total value of nearly 360 billion tenge and about 2,700 cars exported. This year Kazakhstan will start production of over 10 new car models. In the short term, the total output of the automotive industry is to increase to 100 thousand cars, of which 10-15 thousand will be exported to Russia, Kyrgyzstan, Uzbekistan, Tajikistan, Belarus, Azerbaijan and the other countries. A new Hyundai plant with an annual capacity of 45 thousand vehicles will be opened in Almaty. Besides, Kazakhstan has signed agreements with Uzbek companies Uzavtosanoat and UzAuto Motors on the deliveries of car kits, according to www.pm.kz.

AGRICULTURE KazAgro reduced the number of subsidiaries In connection with the reform and improvement of the company’s performance, the national managing holding KazAgro has reduced the number of subsidiaries to three. KazAgroGarant JSC was merged with the Agricultural Financial Support Fund JSC, KazAgroProduct JSC was merged with Agrarian Credit Corporation JSC, Kazagromarketing JSC was liquidated, their message says. Food corporation transferred to the Ministry of Agriculture. Three specialized financing companies remain in the holding structure. The agrarian credit corporation will be engaged in lending to agribusiness entities, funding of credit partnerships, microfinance organizations, second-tier banks, leasing companies. The Fund for Financial Support for

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Agriculture will continue microcrediting small businesses, guaranteeing loans, and participating in the insurance system in the agricultural sector. KazAgroFinance will provide leasing services for agricultural machinery and equipment. Last year, KazAgro paid off foreign currency liabilities and adopted a transformation program that envisaged breaking even at the end of 2020. In 2019, KazAgro funded agribusiness entities in the amount of more than 477 billion tenge, of which more than 448 billion tenge and about 29 billion tenge were allocated for lending to agriculture and about 29 billion tenge for the purchase of grain. The loan portfolio of KazAgro amounted to 886 billion tenge, and the number of borrowers increased to 77 thousand. In 2019, 56 investment projects were funded with a total value of 84 billion tenge, of which 24 projects were commissioned with a total value of 21 billion tenge, in which more than 770 workers were created places. In 2020, it is planned to commission 31 investment projects worth 56 billion tenge with the creation of about 3 thousand jobs, Kapital reported.

Fruit storage opens in Almaty region in Kazakhstan A modern fruit storage of a new generation has begun work near the village of Shelek in the Almaty region. A refrigerated warehouse for storing apples and other fruits was implemented with the financial support of Agrarian Credit Corporation. “The total amount of the project is 6.5 billion, of which more than 4.5 billion tenge was provided by the Agrarian credit corporation, the remaining money is the investor’s own funds,” Murat Daribayev, chairman of the board of the Agrarian Credit Corporation said. The Alma Mater Fields project was funded by the Corporation in stages from 2017 to 2019 under the Agroexport program. The state supported the creation of two orchards on 120 and 90.5 hectares, and a fruit storage for 3,600 tons. The refrigeration complex maintains freshness of products up to 12 months. This will allow delivering fresh fruits to domestic and foreign markets all year round. The fruit storage is equipped with 18 refrigerators with adjustable gas environment and humidity. The metal structures of the complex are of Kazakhstan production, the skin is Russian, and all equipment is Dutch. Another promising export project has been launched in the Almaty region. At the site of an abandoned farm in the village of Kokpekty, which is near the city of Ushtobe, a new pig-breeding complex for 1200 animals was opened. In September last year, the Ministry of Agriculture of Kazakhstan signed a protocol on requirements for the export of pork to China. Every year, residents of China consume more than 57 million tons of pork, which is 52% of the global volume. This makes it possible for Kazakh agricultural producers to export products to a huge market. In total, in 2019, financing of investment projects by the Agrarian Credit Corporation amounted to 290 billion tenge, Kapital reported.

Kazakhstan increases feed production Over the past 3 years, Kazakhstan has managed to almost double its feed production, but this is not the limit. To become the largest exporter of meat in Central Asia, you will need a lot of animal feed. “Feed production in Kazakhstan increased from 735 thousand tons in 2016 to 1.27 million tons in 2018. Of these, about 71% of the feed was sold to poultry breeders, 18% to livestock breeders, and 6% to pig farmers,” World-Grain quoted a new report from the ID- Marketing agency. In the future, the country will continue to increase livestock feed production. At the end of 2019, several new feed mills were opened in it, including Kazmeal, the design capacity of which is estimated at 360 thousand tons. Kazmeal plant is located in North Kazakhstan region. It was opened in May 2019. The governor of the North-Kazakhstan region Kumar Aksakalov called it not only the largest in the region, but also in the country.

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

An average of 5.5 million tons of grain is collected in the North-Kazakhstan region per year. The region has everything to build up its potential in feed production. Wheat and some oilseeds collected from the fields will be processed at a plant opened in May. Finished products are expected to be sold not only to Kazakhstan farmers, but also exported to other countries. New feed mills will be opened in Kazakhstan, as the attractiveness of the Kazakh agricultural sector for investors is growing. In recent years, the value of investment in the agricultural sector has been growing steadily from 167.1 billion tenge or $427 million in 2015 to 252.9 billion tenge or $647 million in 2016; 352.5 billion tenge or $902 million in 2017, and 395.6 million tenge or $1 billion in 2018. In the first half of 2019, the value of investment increased by 50% compared with the statistical data for the previous year up to 263.7 billion tenge or $673 million. According to ID-Marketing, feed in the country is mainly produced in three regions. In 2018, 29% of the feed produced was produced in Almaty region, 15% in Akmola region, and 12% in North Kazakhstan region. The growth of feed production in Kazakhstan is associated with the desire of the authorities to become the largest exporter of meat in Central Asia. It stimulates demand for them. According to the chairman of the Union of Poultry Farmers of Kazakhstan, a long-term development plan was adopted in the country, suggesting a four-fold increase in poultry production from the current level to 740 thousand tons by 2027. To achieve this, we need our own compound feeds. A development plan is not a pipe dream, since four poultry farms are being built with workshops, where they will produce feed in order to reduce the cost of raising poultry. There are still few private feed mills in the state that could sell their products to large poultry farms. If Kazakhstan increases the production of poultry, it will turn from a net importer through it into a net exporter. Import substitution in the domestic market continues, as new poultry farms are replacing cheap and low-quality imported products of American origin from the domestic market. Kazakhstani authorities have plans to enter the world market by arranging exports to Asian countries, including China, Turkmenistan, Tajikistan, and the Middle East. Between 2018 and 2027 compound feeds will be produced in large quantities to supply them to all Kazakhstan poultry producers. Exports will grow, but gradually, due to continued high domestic demand. The state is also increasing pork production. On September 25, Kazakhstani authorities signed a trade agreement with China regarding the export of pork and live pigs. According to the US Department of Agriculture, Kazakhstan is a predominantly Muslim country, in which pork demand has been steadily declining over the past 10 years. So that the surplus of production does not disappear, they adopted the experience of India. There is almost no demand for beef in India, but it is produced for export. Now it has already become the world's largest exporter of it. According to the forecasts of the Union of Pig Breeders, the deal with China will increase the number of pigs in the herd by 2.5 times and sell up to 100 thousand tons of pork per year. Kazakhstan has everything necessary to achieve this goal. While their cultivation is favoured by an overabundance of grains and the absence of outbreaks of ASF. The Union of Pig Breeders and the Ministry of Agriculture of Kazakhstan are against grain exports to other countries, where they are used for the production of animal feed and high value-added products. The net profit from the use of wheat and barley for their domestic production, and then the export of pork, is 19 times higher than from export sales of grain. The government also subsidises livestock breeders to boost beef exports to the world market. In 2018, Kazakhstan shipped 20 thousand tons of beef to other countries, which is 4 times more than a year earlier. Now it is moving towards a new goal of 60 thousand

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

tons of beef, Kazakh Zerno said.

Kazakh PM chairs meeting on development of livestock Minister of Agriculture Saparkhan Omarov reported on measures taken to increase the number of cattle and increase beef production, the potential of the regions for the development of beef cattle breeding. According to preliminary data, in 2019 the gross output of livestock products in the republic amounted to 2,306 billion tenge, which is 12.5% more than the level of the corresponding period of the previous year. The number of cattle increased by 4% to 7.4 million heads, horses — 6.8% to 2.8 million heads, poultry — 2% to 44.3 million heads, sheep — 2, 7% to 16.9 million animals, camels — 3.5% to 214.8 thousand animals, pigs — 2.9% to 822.2 thousand. Production in slaughter weight of poultry meat increased by 16% to 223 thousand tons, beef — by 5% to 501.4 thousand tons, horse meat — by 4.3% to 132 thousand tons, lamb — by 0.8% to 152 thousand tons, pork — by 0.3% to 86 thousand tons. In 2019, 115.7 billion tenge was allocated to subsidize the development of livestock breeding and increase the productivity of the industry. 840 family farms received loans for the purchase of 82.2 thousand head of cattle. The implementation of the agreement on the principles of participation in the development of the modern agro-multi-protein industry in Kazakhstan, signed in December 2019 with the American company Tyson Foods, will give a great impetus to the development of livestock farming. At the first stage, it is planned to build in Kazakhstan a modern meat processing complex with a capacity of about 2 thousand heads per day. The enterprise will not only meet the needs of the Kazakhstani market, but also export products to foreign markets, helping to ensure the country's annual agricultural profit of more than $1 billion. The meeting participants discussed measures to increase the number of livestock, its productivity, ensure the loading of feedlots and strengthen the forage base. The prime minister instructed to continue comprehensive work on the development of livestock in Kazakhstan, the press service of the Prime Minister of Kazakhstan reported.

Kazakhstan introduces a ban on livestock exports Kazakhstan introduced a ban on the export of livestock of cattle and small cattle of all age and sex groups. Last year, 156 thousand heads of cattle were exported from Kazakhstan. 121.6 thousand heads, or 78%, were taken to Uzbekistan, another 14% to Armenia. Nearly 264 thousand heads of sheep were also exported from the country, of which more than half were breeding stock. The main buyer of small cattle is also Uzbekistan. Over 200 thousand sheep or 76% were exported to the neighbouring state. Russia purchased 21.5 thousand heads or 8.1%, Azerbaijan accounted for 18 thousand or 6.7%, Iran for about 12 thousand or 4.5%. “The massive export of livestock for further processing and resale created the basis for speculative price increases for meat products. In addition, the current situation led to a decrease in the load of Kazakhstan meat processing enterprises and feedlots. On average, in 2019, they were loaded less than half of their capacity. The main reason was the shortage of raw materials resulting from the high level of livestock exports,” the department explained. The state program for the development of the agro-industrial complex for 2017-2021 set the task of increasing the export of processed products by 2.5 times, so the department was forced to take measures on the current situation. “Based on the appeals of feedlots and meat processing plants, it was decided to amend the joint order of the ministries of agriculture and finance on some issues of export of farm animals, dated October 21, 2019, which previously temporarily limited only the export of breeding stock,” the Ministry of Agriculture said.

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

The draft document was positively agreed with industry expert organisations and region administrations, a positive conclusion was received from the Atameken NCE and approval of the Interdepartmental Commission on foreign trade policy and participation in international economic organisations. Currently, coordination is being carried out with interested government agencies. “The introduction of changes to the said order will allow preserving and increasing the number of Kazakhstan livestock in the coming years, loading domestic meat processing plants with high-quality raw materials at affordable prices and increasing the production and export of finished processed products,” the Ministry of Agriculture said, Kapital reported.

EuroChem invests $1 billion in new fertiliser plant in Kazakhstan The Ministry of Industry and Infrastructure Development, the Administration of Zhambyl region and EuroChem signed an investment agreement, according to which a plant producing mineral fertilisers will be built and launched in the region by 2021. The future plant with an investment of $1 billion is designed to produce 1 million tons of phosphate fertiliser annually. Phosphorus for production will be extracted in the phosphorite basin of the Karatau. This will make it possible to establish the production of complex fertilisers, minimising the damage to the environment. The annual production volumes of the enterprise will be 120,000 tons of calcium chloride and 400,000 tons of gypsum dehydrate, which will meet the needs of the main industries of Kazakhstan. The launch of the plant is scheduled for 2021. It will employ about 2,000 people. In addition, the project of Zhanatassky wind station was presented, the cost of which is about 50 billion tenge. During the first stage, the capacity of the enterprise will be at the level of 100 MW, during the second at 200 MW. By the end of the first quarter of 2020, 40 wind generators will be installed. Also, Mamin got acquainted with the preparations for the construction of a plant producing a soda ash, Qazaqsoda. According to plans, the construction of the plant should be completed in 2022. The Turkish company Yildirim Group invested 127 billion tenge in the construction. During the first stage, annual production will amount to 400,000 tons of products with a further increase to 1 million tons. The Prime Minister of Kazakhstan visited the fertiliser plant of Kazphosphate in Taraz. During the year, the enterprise produced products worth 142 billion tenge. Most of the products were sold in Kazakhstan, the rest was exported to Russia, China, USA, UAE and Germany. Mamin also participated in the launch of the third production line of the Saule confectionery factory, which created 70 new jobs. From January to November 2019, the volume of manufacturing in the region amounted to 319.5 billion tenge, which is 7% more than last year. Investments in fixed assets added 10.5% and amounted to 250.1 billion tenge. For the same period, 66 investment projects were formed for a total amount of about 2.7 trillion tenge with implementation periods of 2020-2025. They will create 11,000 new jobs, Kazakh Zerno reported.

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ECONOMIC NEWSLETTER, January 2020 Embassy of the Kingdom of the Netherlands EXHIBITIONS IN KAZAKHSTAN (January-March 2020)

Central Asia Houseware International Houseware Exhibition 29 February – 03 March 2020, Almaty Organizer: Central Asia Trade Exhibitions www.houseware.kz

Central Asia Home Textile Central Asia Home Textile Exhibition 29 February – 03 March 2020, Almaty Organizer: Central Asia Trade Exhibitions www.hometextilexpo.kz

ShymkentBuild South Kazakhstan International Exhibition on Construction and Interiors, Ceramics and Stone, Fenestration, Heating and Ventilation, Road Construction 11 – 13 March 2020, Shymkent Organizer: Iteca www.shymkentbuild.kz

AgriTek Astana Kazakhstan International Exhibition for Agriculture 11 – 13 March 2020, Nur-Sultan Organizer: TNT Productions www.tntexpo.kz

FarmTek Astana Kazakhstan International Exhibition for Animal Husbandry and Livestock Breeding 11 – 13 March 2020, Nur-Sultan Organizer: TNT Productions www.tntexpo.kz

HomeDeco Kazakhstan International Exhibition for Home Textile and Interior Design 16 – 18 March 2020, Almaty Organizer: Turkel Fair Organization www.homedecofair.com

Securex Kazakhstan Kazakhstan International Security Exhibition 17 – 19 March 2020, Almaty Organizer: Iteca

www.securex.kz

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

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

Embassy of the Kingdom of the Embassy Office in Almaty Netherlands

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