President Unveils Nat’l Infrastructure Plan in Early Address
President Nursultan Nazarbayev delivered his latest state-of-the-nation address at an extended session of the Political Council of the Nur Otan party in Astana on Nov.11, introducing a new economic policy that will see massive state investment in infrastructure over the next few years.
The address is usually delivered in December, January or February, but this year’s address was moved forward in order to get proposed anti-crisis steps into the budget plans for the upcoming year and begin work quickly.
Kazakhstan’s economy has grown 4 percent in the first nine months of 2014, slower than expected, and is suffering from a 25 percent reduction in oil prices over the past two months and the reciprocal sanctions between the West and Russia over Ukraine.
The next few years will be a time of global challenges, the President said. “Kazakhstan, as a part of the global economy and a country situated close to the epicentre of geopolitical tensions, is affected by these [economic changes]. We see decreases in prices on international markets and a general slowdown of the economy. … The World Bank and IMF [International Monetary Fund] had re-evaluated their global growth forecast for 2014. That is why we need to quickly examine our positions and adjust plans for the coming years,” Nazarbayev said.
The new “Nurly Zhol” (Bright Path) policy resembles Kazakhstan’s previous relatively successful efforts to battle the 2007-2009 global economic slowdown and is evocative of U.S. President Franklin Delano Roosevelt’s New Deal of the 1930s.
Uncorking the National Fund
The policy addresses finance, industry and social welfare issues, but focuses on developing infrastructure. Given falling revenues from raw materials exports, the money will come from Kazakhstan’s National Fund, created in 2000. The fund has accumulated $76 billion from Kazakhstan’s oil and other raw material exports revenues.
In 2007-2009, the government used $10 billion from the National Fund to balance the effects of the global financial crisis. Now is the time to use more of the reserve’s funds, the President said. An additional $3 billion per year will be allocated for the next three years to support the economy, he announced. The government is preparing the decree and including the money in the 2015 budget.
The new allocation should be used to build transport, energy, industrial and social infrastructure, as well as support small and medium enterprises (SMEs), he said, and a special commission will strictly observe the use of all funds and report to him personally.
The second tranche of 500 billion tenge (US$2.8 billion) from the 1 trillion tenge (US$5.6 billion) allocated by the National Fund in February to boost economic growth and employment in 2014-2015 should be used to implement five key goals, he said.
First, 100 billion tenge (US$560 million) will be set aside for lending to SMEs and supporting important projects in the food and chemical industries, mechanical engineering and the service sector. Second, 250 billion tenge (US$1.4 billion) will go to provide additional capitalisation for the government’s nonperforming loans fund. Third, 81 billion (US$447.7 million) will be channelled into infrastructure in the Khorgos special economic zone and the national industrial petrochemical technology parks in Atyrau and Taraz. Fourth, an additional 40 billion tenge (US$220 million) will be poured into the construction of the EXPO 2017 complex in Astana. Fifth, 29 billion tenge (US $160.2 million) will go toward expanding Astana’s airport, including building a new terminal and rebuilding its air strip. The existing facility is at maximum capacity, but the number of visitors to Astana is expected to increase dramatically in the near future, particularly with EXPO 2017 coming up.
Massive infrastructure investment to help boost economic growth
The Nurly Zhol policy itself will be centred around a five-year infrastructure development plan that coincides with the second five-year section of the Programme of Accelerated Industrial and Innovative Development (PAIID). The plan’s overall investment portfolio is estimated at 6 trillion tenge (US$33.1 billion), 85 percent of which is to come from private investors, including foreign investors.
The development of transport networks and logistics infrastructure is a key part of the plan and intended to shape macro-regions within the country around hub cities. Roads, railways and airlines are to connect the regions to the capital and to each other. Major road projects will get the most attention: the Western Europe – Western China highway; Astana – Almaty; Astana – Ust-Kamenogorsk; Astana – Aktobe – Atyrau; Almaty – Ust-Kamenogorsk; Karaganda – Zhezkazgan – Kyzylorda and Atyrau – Astrakhan. A ferry service from the Kuryk port on the Borzhakty – Ersai railroad is to boost export potential on the Caspian Sea. The government will also explore opportunities to build or lease terminal facilities, dry ports and sea ports.
Regarding energy infrastructure, the government will focus on developing two high-voltage lines, from Ekibastuz – Semey – Ust-Kamenogorsk and Semey – Aktogai – Almaty – Shymkent.
Other significant goals include upgrading public utilities infrastructure and water supply systems, which will need 200 billion tenge (US$1.1 billion) per year until 2020, Nazarbayev said. Attracting investment from the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB), and the Islamic Development Bank (IDB), as well as private investors, is another goal.
Increasing urbanisation is stressing the housing market, Nazarbayev said, announcing changes to state programmes on the construction of rental houses that would exempt less-affluent candidates from needing to make an initial deposit and help get lower interest rates from banks. One-hundred-eighty billion tenge (US$995 million) is to be allocated in 2015-2016, and the programme seems set to make rent and housing more affordable.
Seventy billion tenge (US$387 million) will go toward repairing schools and eliminating three-shift education by 2017. Regional authorities will receive an additional 20 billion (US$111 million) to reduce overcrowding in preschools. Universities that have been designated as hubs for training specialised personnel and linking science and the real economy will receive 10 billion tenge (US$55.5 million) by 2017 to upgrade their equipment and other relevant infrastructure.
Work on increasing SMEs’ share in the nation’s gross domestic product to 50 percent, ongoing under the Kazakhstan 2050 Strategy, is to be continued, Nazarbayev said. Loans totalling 155 billion tenge (US$857 million) from the Asian Development Bank (ADB), EBRD and World Bank are to be used over the next three years, he said.
Structural reforms in the economy should accompany the National Fund investments, the President said, and this requires support from international financial organisations to implement joint projects. The World Bank, ADB, EBRD and IDB are ready to provide about $9 billion to 90 priority projects to support investment activity, maintain income levels and stimulate job creation. This will ensure sustainable growth in the short and medium term, the President said.
Overall, Nazarbayev said, the Nurly Zhol economic policy will help create up to 200,000 new jobs through road construction projects alone. This will also stimulate related sectors of the economy.
Concluding his address, Nazarbayev stressed that economic growth depends on domestic peace and ethnic harmony. The country’s young people have never seen ethnic conflict, nor the depression and strife of the 1990s, Nazarbayev said.
“Many treat stability and a comfortable life in Kazakhstan as something omnipotent. But what is stability? It is the well-being of our families, security and a roof over our heads. Peace is the joy of parenthood, the health of our own parents and the happiness of our kids. Peace is a steady job, salaries paid and confidence in the future. Peace is stability, a public heritage that should be protected, preserved and enhanced day by day,” he said.