Embassy of Kazakhstan

With reference to our News Bulletins of December 21, 2008 and February 12, 2009 the Embassy would like to inform our readers that Kazakhstan continues implementing its proactive economic and social policy designed for protecting the country’s people and economy against negative effects of the global crisis.

The Government has already taken a number of steps to diminish effects of the current global crunch in domestic economic system, including a sophisticated joint action plan and bank bailout strategy which helped the country’s major banks to survive first severe blows of the crisis waves.

Below please find an outline of the Government’s efforts on assisting Kazakhstan’s people, businesses and enterprises in staying afloat and maintaining living standards in the challenging environment.


The Government of Kazakhstan is implementing a series of measures to protect the population of Kazakhstan against the negative impact of the global economic crisis.

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Providing employment is crucial
 
In 2008, the following was accomplished as part of the government program to counter unemployment:
- 238.2 thousand jobs were created in the course of implementing investment projects, government and sectoral programs;
- 10.8 thousand social workplaces were established for target population groups;
- 1,002 memoranda of understanding were signed between the Ministry of Industry and Trade, the Ministry of Labor and Social Protection, akimats, and large and medium enterprises;
- the quotas for foreign labor were reduced by one half compared to last year to protect the domestic market;
- youth internship programs were used in most of the regions to reduce youth unemployment. More than 40% of the graduates from educational establishments who participated in these programs have found jobs. There were about one thousand jobs fairs held that helped almost 27,000 people find employment.

1.     Regular monitoring is conducted to identify regions and sectors facing the risk of mass layoffs 

2.     Regional akimats have developed employment stabilization programs that include measures to provide jobs, training and re-training opportunities, and social support for redundant workers.
 
3.    The Government of the RK is seeking to provide employment for the most vulnerable population groups for whom the loss of employment may be particularly damaging. This refers in particular to single mothers, families with more than three children, people close to the retirement age, etc. 

4.    Social insurance schemes will be used to provide social support for the workers made redundant. In accordance with the existing legislation, those covered by a compulsory social insurance scheme are entitled to four months’ worth of social benefits payable from the Social Insurance Fund, should they become unemployed. The size of the benefits depends on how long a person has been a member of the scheme, and on the amount of insurance premiums. (Last year, the average monthly unemployment benefit paid from the Fund stood at 21,000 tenge).

5.    All in all, under the plan of action jointly adopted by the Government, the National Bank and the Financial Supervision Agency to stabilize the economy and the financial system in 2009-2010, as many as 348.3 thousand new jobs will be created in 2009 as a result of 5,785 projects being implemented under the 30 Corporate Leaders program and the anti-crisis measures to support the agricultural sector and SMEs.

 
Containing the rapid growth of unemployment has been defined as a key task for the Government in 2009. Re-training plans and a plan of measures to develop domestic production capacities will be finalized by April 30, 2009. A draft law extending the maximum period of entitlement to unemployment benefits from 4 to 6 months in 2009-2010 will be submitted to the parliament by April 20, 2009. The coverage of the social workplace and youth internship programs will be expanded no later than April 30, 2009.
 
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SUPPORTING SMALL AND MEDIUM ENTERPRISES

         On November 6, 2007, the Government adopted its first stabilization plan whereby 550 billion tenges ($ 4.6 billion, or 3.5% of the country’s GDP) was allocated from the budget. The plan was fully implemented between November 2007 and December 2008.  The plan is focused on the following: support for the construction industry, support for the development of small and medium enterprises, food security, social safety net, implementation of structural economic reforms in the administrative, tax and budget spheres of public administration.
 In 2008, the following main instruments were used to support small and medium enterprises:
    1. Support for small and medium enterprises was enhanced. Allocations from the budget totaled 214.8 billion tenges, including 126.8 billion tenges provided from the central government budget, 10 billion tenges from JSC Fund Damu, 28 billion tenges from the local executive authorities, and 50 billion tenges from second-tier banks.
2. Measures were taken to eliminate the administrative barriers and improve the business environment for small and medium enterprises, which had a positive impact on the overall business climate in the republic, something recognized by the World Bank in its Doing Business report where Kazakhstan was moved from the 80th position in 2008 to the 70th position in the 2009 global ranking).
    3. A one-year moratorium on administrative and tax audits of small and medium enterprises has been announced.
    4. To stimulate domestic demand, amendments were made to the law on state procurement to give priority to domestic suppliers (to increase the share of the local content).

On January 20, 2009, a plan of action was jointly adopted by the Government, the National Bank and the Financial Supervision Agency to stabilize the economy and the financial system in 2009-2010. Support for small and medium enterprises is one of the key dimensions of the plan:
- funding – the Samruk-Kazyna sovereign wealth fund will allocate an additional US$1 billion in 2009 to support small and medium enterprises irrespective of what sector they operate in. 70% of the money will be used to refinance the ongoing projects, and 30% will be made available for new projects;
- creating an efficient financing infrastructure, which will comprise the institutions of Samruk-Kazyna (the Development Bank of Kazakhstan, Damu, social enterprise corporations), KazAgro (the Agriculture Support Fund, KazAgrofinance, the Agrarian Credit Corporation), second-tier banks with government participation (KKB, NSBK, BTA, Alyans), as well as those who have signed the memorandum of understanding (ATF, BTsK, Kaspiy Bank, Nurbank, Eurasian Bank, Cesna Bank, Bank Astana-Finance, Sberbank);
- maintaining a low interest rate and providing re-financing opportunities for the previously issued loans (12.5%);
-  providing SMEs with broader access to state procurement;
- financing for new industrial, infrastructural, innovative projects, including in agriculture;
- granting direct tax concessions. January 1, 2009 was the enactment date of a new Tax Code designed to facilitate modernization and diversification of the economy, and help bring business out of the shadows. The most fundamental and important feature of the Tax Code is the gradual reduction of the corporate income tax rate to 20% in 2009, to 17.5% in 2010, and to 15% in 2011;
- limiting and reducing administrative barriers and audits,  easing licensing requirements, streamlining procedures for establishing an enterprise and doing business;
- developing micro-credit schemes in rural areas using the regional postal network of the Kazpochta joint-stock company;
-  establishing a network of centers to promote enterprise in each regional capital.

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 CONTAINING PRICE GROWTH
 
The Government has taken a number of additional measures to maintain price stability in the country:
- strengthening supervision over compliance with the memoranda of understanding entered into between the Government and suppliers of fuel. Agricultural enterprises will be provided with fuel for the planting season;
- containing the growth of utility tariffs;
- re-negotiating memoranda with producers and large retail chains to make sure that the prices of goods produced without imported inputs are not raised;
- developing measures to support domestic products and food producers;
 - The adjustment of the tenge exchange rate implemented in early February 2006 will not lead to abrupt or massive price hikes, since 68% of food items and 66.4% of non-food products that are in the staples category are produced domestically. Accordingly, a considerable part of the consumer basket is not going to go up in price in the short run.
- The movement of the tenge exchange rate will not contribute to inflationary pressures in any significant way. According to the governor of the National Bank, inflation was projected at around 9% before the devaluation, but given the current situation, the inflation forecast has been revised to 11%. Therefore, the “price” of the devaluation will be 2 percentage points of the inflation rate.
- The Government is taking preventive measures with regard to a number of staples, where there is a potential for price increases, in particular, with regard to the cost of medicines.
-  If necessary, stabilization stocks will be used.
Stabilization stocks of such socially important food commodities as grain, vegetable oil, rice, meat, instant milk, butter have been established, and restrictions on export of such products have been introduced.
To address stability issues on the domestic grain market, the national Food Contracting Corporation procured 580 thousand tonnes of grain for the stabilization stock in 2008.
In addition, pursuant to the Government resolution adopted on February 10 of this year, 11.2 billion tenges will be allocated from the central Government budget to procure grain harvested in 2009 for Government stocks.
To meet the requirements of the regions where no grain is produced locally, regional stabilization stocks are being established by procuring and bringing grain from the country’s northern regions. Intra-regional stabilization stocks of grain in the amount of 163.9 thousand tonnes have been established in the grain-producing regions.
 - The Government is widely implementing a package of compensatory measures to protect the socially vulnerable population groups against the negative impact of the global crisis that changed the level of domestic prices:
The 2009-2011 budget has provisions for annual increases of the wages of those employed in the public sector, of pensions and social benefits, the rate of such increases considerably exceeding that of inflation.
In 2009, the wages of public sector employees have been increased by 25%, and, by 2011, they will be twice as high as in 2008.
The average pension has been increased by 25% in 2009, and, by 2012, it will be 2.5 times the 2007 amount, while by 2011 the base pension will be increased to 50% of the subsistence minimum.
As of January 2009, state social benefits and special social benefits have been increased by 12% and 9% respectively, and they will continue to be increased every year.