Astana Calling #309

ASTANA CALLING

Ministry of Foreign Affairs Republic of Kazakhstan

Central Communications Service for the President of Kazakhstan

A WEEKLY ONLINE PUBLICATION / WWW.MFA.GOV.KZ ISSUE NO 309 / FRIDAY, JUNE 21 2013

President Completes Successful Visit to Uzbekistan Key agreements signed

Defending the Rights of Foreign Investors Investors in Kazakhstan have an ombudsman

Economics Minister Reveals New Budget Policy

EU and Central Asian States Discuss Security Kazakhstan takes part in dialogue in Brussels

Aim is stable growth to 2020

News from the Government in Brief

Also in the News

Things to Watch

The two Presidents share a lighter moment in Tashkent last week

President Completes Successful Visit to Uzbekistan President Nursultan Nazarbayev completed a highly successful visit to Uzbekistan on June 14. As well as signing a number of bilateral agreements, he and President Islam Karimov reached agreement on issues such as regional security and water supplies that will have an effect on the wider Central Asian region.

President Nazarbayev was keen to point out the symbolic nature of the timing of his visit to Tashkent, marking as it did 15 years since the signing of the Agreement on Eternal Friendship between the two neighboring states. Added to this Agreement now is the Agreement on Strategic Partnership, which the two Presidents signed on this visit.

The Agreement on Strategic Partnership may be the most important document which was signed during President Nazarbayev’s visit, but it was by no means the only one. Also of great significance for future relations between the two countries – and, by extension, of benefit to the overall situation in Central Asia – were the Cooperation Agreement between the Foreign Ministries of Kazakhstan and Uzbekistan; the Program of Cultural Cooperation signed between the two Cultural Ministries; and the Protocol on organizing the exchange of provisional information on trade and means of transport for crossing the customs border between the two countries. This protocol was signed between the Ministry of Finance of Kazakhstan and the State Customs Committee of Uzbekistan.

A particular place in the discussions between the two Presidents was given over to the question of water resources in the region, something President Nazarbayev described as “a life and death issue”. The President had in mind not simply the supply of water for the needs of the populations of the region, notably for agriculture, but also the use of water for hydro-electric power generation, especially in rivers which transcend the region’s borders. He used the final press conference to call for greater regional cooperation, saying that he hoped that, “our friends in Tajikistan hear our voice and take account of our interests”.

In his closing address, President Karimov stressed that the sound economic relations between Kazakhstan and Uzbekistan form the foundation for the friendship and cooperation between the two neighbors. President Nazarbayev agreed, pointing out that there are 118 Kazakhstan-Uzbekistan joint ventures in Kazakhstan alone, and 178 companies in Uzbekistan which operate with input from Kazakhstan. Trade between the two countries grew by 30% last year and a special committee on investment is being created to widen the possibilities of each side to work in the other’s country.

A particular area where cooperation between the two countries is seen to be of huge potential value to each is the role of both countries in the transit bridge between Europe and Asia. Construction of the “Western Europe-Western China” highway is proceeding rapidly in Kazakhstan, and President Nazarbayev made it clear to his hosts that he would be delighted if Uzbekistan would play a greater role in this project. He suggested that the governments of each country be instructed to look into ways of extending cooperation in the transport sphere, including improving bus links in the border regions; a new passenger train running between Almaty and Tashkent; and developing better air links between Kazakhstan and Uzbekistan.

“Much in terms of the reliable economic development and security of the whole region depends on the effectiveness of the cooperation between Astana and Tashkent.”

President Nazarbayev ASTANA CALLING / ISSUE 309 / 2

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Car manufacturing is one of the areas to have attracted foreign investment to Kazakhstan

Defending the Rights of Foreign Investors An inaugural meeting took place this week in Astana of the working group on the protection of foreign investors’ rights in Kazakhstan. Otherwise known as “the investors’ ombudsman”, the group is the responsibility of the National Agency for Exports and Investment, Kaznex Invest. Kaznex Invest comes under the Ministry of Industry and New Technologies, and the Minister, Asset Issekeshev, who is also a Deputy Prime Minister, chairs the group.

The idea of creating the working group has been taken from the practice in a number of other countries, such as Russia, the US and South Korea. The group plans to meet at least once a quarter and will carry out regular surveys of investors in order to identify problem areas.

As well as the Ministry of Industry and New Technologies, the group brings together the heads of a number of ministries and state bodies who come into contact with foreign investors: the General Prosecutor’s Office; the State Security Service; the Supreme Court; the Oil and Gas Ministry; the Interior Ministry; the Ministry of Justice; the Ministry of Finance; the Ministry of Economy and Budget Planning; the Ministry of Labor and Social Security; the Emergencies Ministry; the Ministry of the Environment; and the Agency for Fighting Economic Crime and Corruption.

According to the World Bank, Kazakhstan currently stands at number 49 in the “Ease of Doing Business” table, out of 185 countries ranked. And the World Bank has welcomed a number of improvements made to doing business in Kazakhstan in recent years. In 2008, Kazakhstan made paying taxes easier by lowering sanctions for late payments of taxes. Registering property and getting credit became easier in 2009, and these processes have continued to improve.

A significant step forward for investors was made last year, when Kazakhstan strengthened investor protection by regulating the approval of transactions between interested parties and making it easier to sue directors in cases of prejudicial transactions between interested parties.

And there have already been three major improvements this year, according to the World Bank. Starting a business was made easier, when the requirement to pay in minimum capital within three months after incorporation was removed. The process of getting credit was simplified, when Kazakhstan strengthened its legal framework for secured transactions by introducing new grounds for relief from an automatic stay during rehabilitation proceedings.

Also, Kazakhstan strengthened its insolvency process by introducing an accelerated rehabilitation procedure; extending the period for rehabilitation; expanding the powers of and improving qualification requirements for insolvency administrators; changing the requirements for bankruptcy filings; extending the rights of creditors; changing regulations related to the continuation of operations; introducing a time limit for adopting a rehabilitation plan; and adding court supervision requirements.

This latest move of introducing an investors’ ombudsman could well see Kazakhstan rise still further in the World Bank’s table for ease of doing business.

“The creation of the institution of ombudsman makes possible a systematic approach to solving the problems of investors who are already working in Kazakhstan. Global statistics show that some 65% of investments come from those already investing.

So reacting in a responsible manner to problems which arise for existing investors should lead to the growth of re-investment by companies already in our market.”

Deputy Prime Minister and Minister of Industry and New Technologies Asset Issekeshev ASTANA CALLING / ISSUE 309 / 3

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Minister for Economy and Budget Planning Yerbolat Dossayev at Tuesday’s briefing

Economics Minister Reveals New Budget Policy The Minister of Economy and Budget Planning, Yerbolat Dossayev, held a meeting with journalists on Tuesday to outline the government’s new Budget Planning process for the period up to 2020. The new plan is being introduced at a time when the economy is showing a 5% growth in the first five months of this year, and is aimed at ensuring stable growth in the years ahead.

The budget policy has been worked out allowing for a small deficit. For this year, there is a budgeted income of almost KZT 5,230 billion; while government expenditure in 2013 is expected to be nearly KZT 6,100 billion, giving a deficit of KZT 860.6 billion. By carefully controlling the deficit, the plan is to lower the deficit to 1.4% of GDP by 2020. At current rates, the public debt is running at 15% of GDP; the aim is to bring this down to 13.9% of GDP by 2020.

An important way in which the deficit can be controlled is by continuing to put oil revenues into the National Fund. With careful management of these revenues, by 2020 it is forecast that they will account for no less than USD 180 billion, or 32% of GDP. The government is well aware of the need, though, not to rely too much on oil revenues, and to have greater diversification in the economy. Non-oil revenues must be increased, and the government is looking into ways of widening the taxation base to do this.

The government expects to be able to fund its regular expenditure completely through non-oil revenues by 2018.

Key to this process is greater efficiency in the planning and use of budget funds. In 2014, a thorough audit will be carried out of all government spending and investments. The idea is to identify and do away with inefficiencies and waste of government resources.

Administrators at all levels will be made to account for any failures to meet budget targets. And there will be a careful examination of any cases where government resources are being used when private investment should be in place.

This strict control over investment practice will be particularly applicable in the construction sector. Any building work which is financed by the state budget will be carefully monitored and tight rules applied.

Another area which will be subjected to strict control will be the question of funding of projects from local budgets or the state budget. The budget for the development of the regions will be increased, but local authorities will be expected to exercise greater control over their local budgets instead of reverting to the national budget. Local authorities will be judged, too, on increases in their local tax revenues and on the number of permanent jobs they create.

“We have to acknowledge that the system of state planning which has been in place for the last few years has become outdated and needs to be replaced. A number of problem areas have arisen. Among these are a number of state aid documents that have been adopted but cannot be efficiently implemented, as well as duplication, weak linkages in strategic, economic and budget planning as well as ineffective risk management” Minister of Economy and Budget Planning, Yerbolat Dossayev ASTANA CALLING / ISSUE 309 / 4

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EU Special Representative for Central Asia Patricia Flor (centre L) and Deputy Secretary General for the External Action Service Helga Schmid (centre R), with other participants at the Brussels meeting of the High Level Security Dialogue

EU and Central Asian States Discuss Security The inaugural round of the High Level Security Dialogue took place last week in Brussels, between the European Union (EU) and the countries of Central Asia: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The meeting was held at the level of Deputy Ministers of Foreign Affairs. Alexei Volkov represented Kazakhstan. The meeting was chaired by the Deputy Secretary General of the European External Action Service, Ms Helga Schmid.

Kazakhstan has been pressing the EU for such a forum on security in the region since successful meetings were held in Paris in 2008 and Brussels in 2009. As Mr Volkov said when addressing the meeting, “We are delighted that the idea which we put forward has finally come about and that we have all gathered here today to discuss the very relevant questions of regional security. I am sure that this forum will provide an excellent opportunity for an exchange of views on existing and new challenges and threats to our regional security.”

It is intended that the High Level Security Dialogue become a regular feature of relations between the EU and the countries of Central Asia. The main topics which will feature are political and security issues of shared concern, including terrorism, extremism, drug trafficking and threats posed by weapons of mass destruction.

Clearly, though, there was one subject uppermost in the minds of all those attending the meeting: the situation involving Afghanistan and especially what will happen after the US and allied forces withdraw from the country in 2014. (This was also a subject discussed by President Nazarbayev with President Karimov during his visit to Uzbekistan last week.)

Deputy Minister of Foreign Affairs Alexei Volkov

Kazakhstan has already made clear not only that it regards the question of Afghanistan as central to the security of the whole Central Asian region, but that it is very willing to take an active role in encouraging a peaceful and positive outcome to the situation in Afghanistan. The latest round of the Istanbul Process on finding a lasting solution to the Afghanistan question was held in Almaty; and Kazakhstan has put forward the proposal that Almaty become a hub for multilateral diplomacy for the United Nations, focusing on Afghanistan and the region as a whole.

Mr Volkov said that Kazakhstan considers that the global community, under the auspices of the UN, should play an active role in finding a stable political solution in Afghanistan, in close cooperation with the Afghanistan government. He went on to say that Kazakhstan supports – both morally and through physical aid – attempts by the government of Afghanistan to create a stable, democratic state.

The participants in the meeting agreed a number of action points: intensified implementation of the Joint Plan of Action for Central Asia under the UN Global Counter Terrorism Strategy, including through expert assistance; to continue with the EU’s border and counter-drug addiction programs, including BOMCA (Border Management in Central Asia) and CADAP (Central Asia Drug Action Programme) and the next phase of the “Heroin Route” project that will strengthen trans-regional law enforcement cooperation; to renew and update the EU-Central Asia Action Plan on Drugs, for adoption at a High Level EU-Central Asia Conference later this year; and to foster improved connections between EU programs in Central Asia and Afghanistan along the shared borders in the region, in order to enhance security, trade and transit in border regions and promote economic development.

All parties agreed to hold the next meeting in 2014 in Tajikistan.

“Kazakhstan is in favor of actively bringing Afghanistan into the political and economic life of the region. As you know, this is an aim of the states taking part in the Istanbul Process, and Kazakhstan hosted the Third Ministerial Conference in Almaty on April 26 2013.”

Prime Minister Serik Akhmetov ASTANA CALLING / ISSUE 309 / 5

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News from the Government in Brief Government and ADB agree diversification plan The Ministry of Economy and Budget Planning signed a memorandum of understanding this week with the Asian Development Bank (ADB) on a program for exchanging knowledge and experience. The program will include joint research on multilateral growth and diversification of the economy; institutional and political development; regional cooperation and integration; and raising competitiveness.

The research, which will be carried out from 2013 to 2015, will be funded in equal parts by the Government of Kazakhstan and the ADB. Announcing the move, the Minister of Economy and Budget Planning, Yerbolat Dossayev, said, “Kazakhstan sets great store by its cooperation with the Asian Development Bank, which is supporting us in our modernization of the economy and in carrying out important social projects.” For the Bank, the Vice President (Operations), Xiaoyu Zhao, said that they were keen to work with countries such as Kazakhstan where the mean personal income is higher than average, as they can cooperate on a level beyond simply financial support.

Government pledges development of geology The Prime Minister, Serik Akhmetov, told a meeting of both houses of parliament this week that the government is committed to developing geological exploration in Kazakhstan. He said that the government’s task is to create favourable conditions for the development of geology in order to encourage business and investors to make their input of technology and new working methods.

Mr Akhmetov said that the government would create geological research centers, “proper institutes with new methodology, new technology and new equipment”. He said that he was convinced that working with new specialists and new technology would produce a significantly improved result in the geological field.

Exports to Customs Union up 30% in 2012 Exports from Kazakhstan to countries of the Customs Union between January and December 2012 were up 30% on the same period in 2011, the State Statistics Agency has announced. The improvement was not uniform across all sectors of the economy, however. The export of commodities for the period actually fell by over 23%, but the export of processed goods was up by almost 17%. In terms of finished products, the rise was actually almost 30%.

Kazakhstan’s external trade with the Customs Union amounted to over USD 24.5bn, in itself an increase of almost 7% on 2011.

The value of exports fell slightly – down by USD 6.8bn, or 3.7% - while imports rose by nearly USD 18bn (an increase of 11.7%).

“Speciality Fair” takes place in Kazakhstan This week has seen the first “Speciality Fair” throughout Kazakhstan, where employers have been able to take part in the training of their future staff. An element of the “Labour Road-Map 2020”, this is very different from a “Job Fair”. The employer can choose a particular higher educational institute and thus make contact with specific students who may be able to work for him or her in the future. In this way the employer can have a direct input into the training of future employees, explaining to the institutes and the students what he or she is looking for. The employer can then sign a social contract with the student, guaranteeing them future employment.

The “Speciality Fair” took place in centers all over Kazakhstan, and attracted representatives of many large companies, higher educational establishments and unemployed people who wanted to find out just what sort of qualifications employers are after.

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Also in The News…

• President congratulates new Iranian President President Nazarbayev sent a telegram of congratulations to Hassan Rouhani, following his election as the new President of Iran. President Nazarbayev said that he was convinced that under President Rouhani Iran would enter a new stage of its development, and that the friendly relations between Kazakhstan and Iran would work for the benefit of the peoples of the two countries. (akorda.kz) • Parliamentary delegation visits Russia A delegation headed by the Chairman of the Senate, Kairat Mami, visited Russia from June 17-19 at the invitation of the Chairman of the Federation Council of the Russian Federation, Valentina Matvienko. As well as meeting Russian parliamentarians, the delegation from Kazakhstan took part in an international conference, “The Great Patriotic War: lessons of history, memories and the brotherhood of nations”. They also attended a round table in honour of the 10th anniversary of the Congress of leaders of world and traditional religions.

• Kazakhstan-Azerbaijan Business Forum in Aktau A forum to encourage business between Kazakhstan and Azerbaijan took place on June 19 in Aktau. The forum concluded with the signing of a memorandum on cooperation between business people from the two countries.

• New civil defense bill passed by Majilis A new bill on civil defense measures was passed by the lower house of parliament, the Majilis, in its first reading. The measures are designed to operate in peacetime and in wartime, especially in the event of a natural disaster or a fire. There are around 50 fires a day in Kazakhstan, and fire crews are called out up to 150 times a day. There are some 700 nongovernmental fire crews in the country. (tengrinews.kz) • Kazakhstan-Swiss economic conference in Astana A conference jointly organised by the L.N.Gumilyov Eurasian National University, the Ministry of Education and Science of Kazakhstan and Lucerne University in Switzerland took place in Astana this week. The title was, “Steady growth in the economy: innovation and competitiveness”. Leading economists and other specialists from Kazakhstan and Switzerland took part. (bnews.kz) • Innovation forum in Almaty “Innovation: an era of endless revolutions” was the title of a forum which took place in Almaty this week. Participants looked at global trends in innovation; Kazakhstan’s move from an economy based on natural resources to innovation; innovation for business; innovation technology in the regions; and issues of technology transfer. (bnews.kz)

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• Speedy customs clearance for cars in Almaty Residents of Almaty who want to receive customs clearance on an imported car can now do so in half an hour, if they have all the necessary documentation. (tengrinews.kz) • Air Astana in Paris Air Show spotlight For the first time an aircraft bearing the insignia of Kazakhstan’s national airline, Air Astana, has been displayed at the Paris Air Show. The Brazilian aircraft manufacturer, Embraer, chose Air Astana to display their new Embraer-190 passenger liner.

The aircraft has a range of 4,200km and can carry 97 passengers. (tengrinews.kz) • Films from Kazakhstan shown in Vienna Two of the latest film releases from Kazakhstan are being shown in Vienna as part of the festival, “The Days of the Cinema of Kazakhstan”. Critics say that audiences have been impressed by “Warriors of the Steppe” and “The Old Man”, based on Ernest Hemmingway’s novel, “The Old Man and the Sea”. (tengrinews.kz) • Singer from Kazakhstan becomes UN refugee ambassador Singer and composer, Aidos Sagat has been named as the UN goodwill ambassador for refugees in Kazakhstan. The well-known lead singer of the group “Urker” has been an honorary patron of the UN High Commissioner for Refugees in Kazakhstan since 2010. He was chosen for his communication skills, and also because of his ability to engage with young people. (tengrinews.kz) • Gold medal for young Kazakhstani wrestler Bolat Sakayev won the gold medal for freestyle wrestling in the Asian Wrestling Youth Championship in Thailand. He beat opponents from Vietnam, China and Iran on his way to the final bout, where he defeated his Indian opponent 8:0. Overall, the team from Kazakhstan came third in the competition. (tengrinews.kz)

Things to Watch • Kazakhstan-South Korean Business Seminar A Kazakhstan-South Korean Business Seminar will take place in Almaty’s “Innovation Technology Park” on June 26, organized

by Kazakhstan’s National Agency for Technology Development and the Innopolis Foundation of South Korea. A number of South Korean technology companies will be taking part, covering such aspects as education, medicine and water purification.

ASTANA CALLING A WEEKLY ONLINE PUBLICATION / WWW.MFA.GOV.KZ Please send comments and questions to pressa@mfa.kz

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