KAZAKHSTAN IN A NEW REALITY: TIME FOR ACTION

The work of the next session of Parliament begins at a challenging time.

Our country continues to confront the pandemic that threatens the entire global community.

We have joined all our efforts to protect the life and health of our citizens.

At this critical time, our friendly people have rallied together as one.

The fight against coronavirus was conducted thanks to the essential features of our people. It showed the importance of mutual assistance, compassion and readiness to jointly confront an unprecedented disaster.

I express my sincere gratitude to doctors, law enforcement officials, military personnel, volunteers, entrepreneurs, conscientious citizens and all concerned for the steadfastness and responsibility they have demonstrated. You have been a vivid example of resilience and great commitment. I consider this a manifestation of genuine patriotism.

In such difficult conditions, our main task is to maintain social and economic stability, employment and income for the population.

Two packages of emergency anti-crisis measures have been adopted. More than 4.5 million Kazakhs, who temporarily lost their income, have received assistance in the amount of 42,500 tenge ($1.1billion). More than 450 billion tenge ($1.1 billion) have been allocated for these purposes. In neighbouring states and even in other developed countries this kind of assistance has not been provided.

Over a million people have received food and household packages.

On the initiative of the Leader of the Nation, the Chairman of the Nur Otan party, more than 550,000 families were covered by the one-off financial support from the Birgemiz Fund.

The pandemic has become a stress test for all states. They are undergoing many difficulties in combatting the virus. One moment the situation stabilises, and the next moment new outbreaks appear.

The government has learned from its mistakes, and managed to reorganise, literally on the run.

The main thing is that we did not hide anything from our citizens, we speak openly about our losses. We tell the truth no matter how bitter these losses may be. This distinguishes Kazakhstan from some other states.

The improvement in the epidemiological situation, however, is no reason for complacency. The fight goes on. According to the forecast of the World Health Organisation, it will take at least two years to defeat the pandemic.

The coming months will be devoted to increased mobilisation. We must be ready for this.

We must act not when a problem appears, but take measures in advance, and work thoughtfully.

All decisions must be based on evidence-based forecasting.

The Government is introducing targeted restrictions and an adaptive quarantine mechanism. A Comprehensive Programme to fight the pandemic will be developed.

All the State’s obligations in the social sphere and in terms of supporting the economy will be fulfilled. For these purposes, 1 trillion tenge ($2.4 billion) has been allocated from the National Fund.

Indexation of social payments will continue. By 2023, it is planned to allocate over 1 trillion ($2.4 billion) tenge to this end.

There is no doubt that we will overcome the current difficulties. But we must not forget about the long-term development of our state in the new geopolitical circumstances around us.

Today, the world has plunged into the deepest recession in a century. The restoration of the global economy, according to experts, will take at least 5 years.

Meanwhile, the competitiveness of future leading states emerges in these times of crises and fundamental change. Kazakhstan must find its decent place in the new world.

Thanks to the far-sighted policy of our First President – Leader of the Nation, Nursultan Nazarbayev, a solid foundation has been created for economic development, and the country has earned its name on the world stage.

In the context of a new global order being forged, it is essential we give substantial impetus to reforms, the quintessence of which is the Plan of the Nation and the Five Institutional Reforms.

It is our duty to ensure a decent life for our citizens, protect their rights, strengthen the rule of law, and reinforce the fight against corruption.

So, what is our plan of action?

A NEW MODEL OF GOVERNMENT

Reforms in this area should be carried out systematically.

Let us start by changing the approach to public administration, human resources policy, the decision-making system and the responsibility for their implementation.

In the context of a pandemic and crisis, the current public administration system is operating at full speed. Solving operational tasks takes time and resources. But in no case should you lose sight of the distant horizon. I have therefore decided to create an Agency for Strategic Planning and Reform, which will report directly to the President.

Such a body did exist in the past and indeed successfully carried out the tasks it was assigned. Now it will once again become the central link in the entire system of state planning. The reforms developed by the Agency must be specific, realistic and, most importantly, mandatory for all government agencies.

A Senior Presidential Council for Reform is being established, the decisions of which will become obligatory. In the interests of greater integrity in assessing the rapidly changing situation, the Statistics Committee is being transferred to the Agency.

It has so evolved that in the system of state planning, the state apparatus acts as the main planner, executor and evaluator. This is not right.

The state planning system should ensure the mobilisation of all human resources and involve the private sector and society as full partners at all stages: planning, execution, evaluation.

We must stop drawing up state programmes with a large number of indicators. It is time to move on to a new format, one of concise national projects, understandable to all citizens. In terms of goal-setting, the result should hold primacy over the process.

Carrying out such radical reform will require revision of the activities of the entire state apparatus. Synergy in the planning and implementation of reforms takes on particular significance here.

It will require a rebooting of the entire system of the civil service. The pandemic and the transfer of most government officials to working remotely showed that the state apparatus can and should be reduced.

I instruct that there should be an acceleration in the timing of the reduction of the state apparatus and quasi-public sector empolyees. This year they should be cut by 10%, and next year by another 15%. Thus, we will solve the problem of reducing officials by 25% in 2021. Depending on the results and taking into account digitalisation, we will then decide on further reduction necessity.

The funds thus saved will increase the salaries of the remaining employees. Low-paid public service is too expensive for society. Misunderstanding of this issue leads to negative selection, loss of competencies, initiative and, most importantly, to corruption. Therefore, from July 1, 2021, a factor-point scale should be introduced. This will lead to increased responsibility and motivation of civil servants.

We are in dire need of new personnel - professionals with fresh views and initiatives. The civil service cannot be allowed to turn into an exclusive caste.

At the same time, it is important to ensure continuity and institutional memory without letting professional and ethical demands fall. Here I would like to touch upon the question of the institution of executive secretaries.

With the introduction of this institution, it was assumed that their unchanging nature would release ministers from administrative and personnel work and ensure the stability of the apparatus. In fact, however, this did not happen. Moreover, there are frequent cases of lack of mutual understanding between ministers and executive secretaries. As a result, the common cause suffers.

Only one person should bear an overall responsibility - a minister appointed by the President. It follows therefore that the institution of executive secretaries should be abolished, their responsibilities being assigned to the heads of staff in the various the ministries.

To implement the above proposals, I am instructing the adoption of a package of amendments to civil service legislation by the end of the year.

Law-making issues should also be reviewed.

During the quarantine, the sluggishness of the legal system gave rise to a "bottleneck" effect. I had to introduce a state of emergency and adopt the so-called "Emergency Decree". But such measures cannot be a systemic response to crisis situations.

The main problem lies in the excessive legislative regulation of the executive branch. We make demands of ministers and governors, but their powers are limited by detailed legal and regulatory norms. This slows down the work not only of the state apparatus, but also overburdens Parliament. Its Chambers are forced to work on detailed rules, which should become the competence of executive bodies.

In a rapidly changing world, slow decision-making becomes a threat to national security. Therefore, within the framework of the Concept of Legal Policy, in changing the legislation, a balance should be ensured between the various levels of legal regulation. We must not hesitate in doing this.

Improving the corporate governance of quasi-state companies is another important problem to be addressed.

There are dozens of national companies and tens of thousands of state-owned enterprises operating in the country. At the same time, large quasi-state organisations are joint stock companies, the purpose of which is to ensure profit. But if part of the state functions is transferred to them, then their activities should be of a purely service, auxiliary, nature for citizens and the economy.

In many joint stock companies a conceptual confusion has occurred. Corporate governance can become an additional bureaucratic procedure.

The reform of the entire quasi-public sector must be continued. Some decisions will be announced today, the rest will be submitted to me in the form of Government proposals.

ECONOMIC DEVELOPMENT IN THE NEW REALITY

The long oil super-cycle appears to be over. We should be prepared for a completely new world market environment.

The creation of a truly diversified, technological economy is not just a necessity for us, but a scenario where there is no other alternative.

At the same time, the economy must work to improve the well-being of the people. We must find a positive answer to the growing public demand for a fairer distribution of benefits arising from the growth of national income and for effective social "lifts".

The new economic course of our country should therefore be based on seven basic principles:

1. Equitable distribution of benefits and responsibilities.

2. The leading role of private enterprise.

3. Fair competition, opening markets for a new generation of entrepreneurs.

4. Increased productivity, complexity and technological efficiency of the economy.

5. Development of human capital, investment in a new type of education.

6. A "Green" economy, environmental protection.

7. Adoption of well-grounded decisions by the state and responsibility to society for them.

In doing so, we must base ourselves on our competitive advantages and real capabilities.

* * *

The most important task facing Kazakhstan is the full deployment of its industrial potential.

Despite successes in this area, we have not yet managed to realise the full potential of the domestic market; about two-thirds of processed goods are imported from abroad.

To ensure the strategic self-sufficiency of the national economy, we must urgently start the development of new procession stages in ferrous and non-ferrous metallurgy, petrochemicals, automotive industry and mechanical engineering, the production of construction materials, food products and other sectors.

The development of a qualitatively new national industry requires a modernised legal framework.

Regulatory and support issues for industry are contained in many disparate pieces of legislation. However, they fail to define cross-cutting goals: there is no link between policies and measures.

There are many laws that govern specific sectors or industries. For example, the Law "On Electricity" or the Law "On Transport".

By the end of the year, a unified Law "On Industrial Policy" should be developed, which will define the basic principles, goals and objectives of the manufacturing industry.

To support industry we also need to improve measures with concrete content. We do not have enough consistency, there is no holistic approach. Because of this, we are dispersing resources on too many projects.

We will continue of course to maintain broad "horizontal” measures in support the industry. At the same time, the Government will have to identify strategically important production facilities, key export priorities, and significantly expand the toolkit of support measures.

For strategic projects, a package provision of grants in kind, concessional financing, partial guarantees and export support mechanisms should be envisaged. Some of the capital expenditure of investors can be recovered by offsetting these against tax liabilities.

It is important to ensure guaranteed procurement from the state, quasi-state sectors and subsoil users.

The main novelty will be the stability of legislative conditions for the entire duration of the project.

It goes without saying that these measures are not exhaustive. The specific level of support will depend on the volume of capital investment and the priority of the project.

In order to fix the agreements between the state and investors, a new instrument will be introduced - a strategic investment agreement.

This initiative should be implemented by the end of the year through elaborating a draft law on economic recovery. The pool of projects that will be included in strategic agreements will be drawn up by the Government by April 2021.

The issue of full access of processing enterprises to domestic raw materials at affordable prices requires a systemic solution.

I instruct the Government to develop regulatory mechanisms by the end of the year to ensure full supply of Kazakh manufacturing industries with raw materials.

Regulated purchasing has a direct effect on industrial development. Their volume is about 15 trillion tenge ($35.7 billion), or a fifth of GDP. The task of the Government and governors is to maximise this potential.

On my instructions, a new law was adopted that improved the procurement system of government agencies. However, procurement by national companies is still non-transparent and inaccessible to ordinary entrepreneurs.

I am instructing that a unified law covering all purchases of the quasi-public sector be developed by the end of the year. All regulated procurement should be carried out as transparent as possible and exclusively through the Single Procurement Window.

Any improvement in legislation will be useless unless there is an appropriate law enforcement practice.

It is not uncommon for cheap and low-quality imported goods to be passed off as domestic produce, which go on to win procurement bids. The register of domestic manufacturers and industrial certificates has not yet become a real barrier for counterfeit manufacturers.

By the end of the year, the Government, together with the Atameken National Chamber, shall submit specific proposals to increase the domestic content.

Our common task in the sector is to increase production in the manufacturing industry by at least 1.5 times over the next five years.

However, significant progress in industrialisation cannot be achieved through industrial policy measures alone. It is imperative that monetary, fiscal and other key policies should not isolated from the needs of the real sector. I will discuss this further.

* * *

A competitive economy cannot be created without a developed agriculture.

In this area, such key problems as limited access to land, lack of available long-term financing and a shortage of professional personnel still remain unresolved.

Measures are urgently needed to develop warehouse and transport infrastructure, in order to avoid being limited by the increasing production of raw materials.

In our country, we can establish 7 large ecosystems for the production and processing of meat, fruits, vegetables, sugar, cereals, oilseeds, dairy products. The fishing industry deserves close attention.

Large projects have a key role to play as the centerpiece of value creation.

Within the framework of vertical cooperation, we should also make effective use of the potential of personal subsidiary plots.

A private household can provide an opportunity for millions of villagers to receive income. We need to involve them in the creation of regional food hubs.

We need to be mindful of potential and horizontal cooperation. Without it, there will be no breakthrough in the development of the agro-industrial complex.

Scattered personal subsidiary plots are at present on the brink of survival. There can be no talk of high productivity, product quality, or regularity of commodity deliveries. Hence our low-level competitiveness and the dominance of imports.

With cooperation, all rights to land and assets are retained and at the same time the efforts of many farms in the purchase of raw materials and  production and sale of products can be consolidated.

It is no secret that hard rural labour is extremely underavalued, and retailers derive the main profit.

Therefore, within the framework of subsidies and tax remissions programmes, a package of measures should be prepared to stimulate cooperation in the countryside.

Another important question relates to the fact that at the end of next year, the moratorium on certain norms of the Land Code on the Use of Agricultural Lands will come to an end.

Our land will not be sold to foreigners. But the Government has to develop other ways of involving agricultural land as a real driving force of economic growth. Investment in the agricultural sector is critical.

The systemic problems in the agro-industrial complex are lack of professional personnel, as well as the low level of development of agricultural science. Here decisive measures are needed from the executive branch.

Technologically outdated irrigation systems remain a serious barrier. Water loss reaches 40%. For water-scarce Kazakhstan, such indicators are unacceptable.

We need to ensure legal regulation in this area, as well as develop economic incentives for the introduction of modern technologies and innovations.

The current state programme for the development of the agro-industrial complex will be completed next year. I instruct the Government, together with business, to start developing a new National Project for the Development of the Agro-Industrial Complex over a five-year period.

Our main tasks are:

- self-sufficiency in socially significant food products;

- stable increase in the income of millions of rural residents;

- increase in labour productivity by a factor of 2.5;

- doubling the export of agricultural produce.

* * *

The development of the transport and logistics industry remains an urgent issue.

The implementation of the first stage of the "Nurly Zhol” programme has been successful, enabling the capital of the country to connect up with the regions according to the "sunray” principle. A new infrastructure framework for the transport system has been formed, the country's integration into global transport corridors has been ensured and the historical status of Kazakhstan as a connecting link between Asia and Europe has been restored.

However, competition in this area is very high. Alternative projects have appeared in the Central Asian region that could reduce the transit potential of Kazakhstan.

The second stage of "Nurly Zhol" should therefore be aimed at consolidating the leading role of the transport and transit sector of our country.

Kazakhstan's competitiveness should grow due to breakthrough infrastructure projects, attracting new countries and companies, upgrading the level of service and the speed of transit routes.

The task is to reconstruct and load road services with over 24,000 kilometres of roads by 2025, that is, all roads in the country.

* * *