30 November 2015
State of the Nation Address by President of Kazakhstan Nursultan Nazarbayev. November 30, 2015
KAZAKHSTAN IN A NEW GLOBAL REALITY:
GROWTH. REFORMS. DEVELOPMENT”
Dear people of Kazakhstan, Deputies of Parliament and Members of Government,
Ladies and Gentlemen,
In a few days’ time we will enter the 25th year of our independence. In just a quarter of a century, Kazakhstan has become not only a sovereign nation with an economy that’s part of the global network, but also an equal member of the worldwide community of nations. We have endured many trials together and have steeled and strengthened. We have achieved impressive economic development at rates previously unseen in our history. Our people have never lived as well as we do now. We have achieved a great deal.
Now the world is changing rapidly. A different era is about to start. Right in front of our eyes, a new global reality with different opportunities and risks is taking shape. Today, Kazakhstan’s economy is adversely affected by a number of external factors caused by the collapse of world markets. We cannot influence the origins of global crises. No one is safe from their effects.
I. The challenges of the new global reality
Now it is important for us to see all challenges stemming from developments in the world.
First, the current global crisis is all-encompassing. Instability has taken over almost every commodity market - financial, hydrocarbon, metals, food and others. This is the main reason for the decline in demand for our exports.
Second, the economic slowdown is witnessed in all economies of the world. No one is surprised anymore by a constant downgrading of growth forecasts of global GDP. Since the autumn 2011, the International Monetary Fund has revised its forecast growth figures six times, reducing them from 5 to 3 percent. And apparently, it could go further.
Third, there is no oil windfall today.
Fourth, the global economy came under pressure from political factors. The world is unstable. Major powers are imposing sanctions against each other. They do not trust each other as they did before. Instability and conflict in the Middle East, North and Central Africa have led to massive flows of refugees. Every day brings new reports of terrorist attacks and deaths of dozens of people. A serious threat to the world today is posed by international terrorism. This is an outcome of external forces destructive interfering with the internal affairs of sovereign states.
World development will take place against the backdrop of fierce competition of global and regional centres of power. The challenges of the new global reality must be set against a comprehensive strategy of action based on our real opportunities.
II. Anti-crisis opportunities for Kazakhstan
Global crises create not only risks but also new opportunities. Most global companies earned their initial successes when economies around them were hit by crises. Virtually all nations that became successful in the past half-century have literally started from scratch.
Kazakhstan also was born in a period of crisis. The first decade of our independence was its most difficult one. We lived then mainly “without oil”. Independent Kazakhstan has always grown in spite of external economic effects. Can we say that the first half of the 1990s was favourable for us, when we had just declared our independence? Production stopped, people lost their jobs and livelihoods. We decently, step by step, overcame that crisis. As soon as our country began to feel the first results of changes, the financial crisis broke out in Southeast Asia, in 1997-1998.
A number of strategic decisions and actions made back at that time had an important positive impact and significance. I mean large-scale privatization and the arrival of most multinational corporations to our economy. At that time, we launched construction of a new capital - Astana, the Caspian Pipeline Consortium began functioning, and the Strategy “Kazakhstan – 2030” was adopted. The importance of the decision to establish the National Fund became clear when the global financial crisis of 2007-2009 broke out. Almost $20 billion USD, which made 14 percent of Kazakhstan’s GDP at the time, was allocated towards projects designed to maintain employment, repair and construct roads, and improve public services in cities and villages. Help was received by the banking sector, farmers, small and medium businesses. Thousands of people who were cheated by real estate developers received new housing with government support.
We have developed and consistently implemented two anti-crisis plans. It has led to our greatly successful experience in overcoming economic difficulties. The current global crisis suddenly fell on our heads. I have repeatedly said that its new wave was almost inevitable. This time, Kazakhstan for the first time applies a proactive anti-crisis strategy.
First, we have already begun a second five-year plan of innovative industrial development, which means that we are creating an economy that is not dependent on exports of raw materials.
Second, we adopted a state program of infrastructure development “Nurly Zhol” (Bright Path). An important aspect of crisis management measures means the transition of the national currency to a floating rate.
Third, we are implementing the Plan of the Nation “One hundred specific steps to implement five institutional reforms”. Parliament is working on adjusting a legal basis for the Plan of the Nation. It includes more than 80 laws. They will go into force on January 1, 2016, as we have planned. Administrative barriers for small and medium-sized businesses are being removed, governance is being improved, as well as education and health. All these measures would also give a margin of safety to the state, society and our economy.
Fourth, we have accumulated the necessary state funds and foreign exchange reserves.
Fifth, on my instruction, different scenario based action plans have been designed, as I have mentioned previously. We are ready for a decrease of oil prices even to as low as 30 or 20 dollars per barrel.
Sixth, the new sectors of economy created in the framework of innovative industrialization are becoming the drivers of economic growth in Kazakhstan. Many manufacturing sectors are demonstrating growth. In five years, the manufacturing industry grew by 1.3 times, chemical industry and construction materials production by 1.7 times. Production of engineering industry goods more than doubled whereas its export tripled. More than 800 industrial projects were implemented. This year, the steel industry grew by 15 percent, the chemical industry by 3.2 percent. Manufacture of mineral products grew by 3.2 percent, production of clothing by 4 percent. The World Bank and the Asian Development Bank forecast higher rates of economic growth for Kazakhstan in 2016.
Seventh, economic behaviour of our compatriots is changing. An increase in productivity by more than 60 percent has been registered.
Our people have never been wealthier than today. Since gaining independence, we constructed more than 1,300 health care facilities and more than 1,700 education centres. All of these facilities were provided with modern equipment. Now our doctors can perform all the most sophisticated operations in our country. As a result, the average life expectancy in Kazakhstan has increased to 72 years.
The state fulfils its social obligations in any case. We have made great strides in researching our history and developing our culture.
The salary of public sector employees, social allowances and scholarships will increase by 30%. All of these will allow people to look confidently to the future and will be the basis for a worthy standard of living.
Dear people of Kazakhstan,
Three years ago, I announced the Strategy “Kazakhstan – 2050”. During this period, despite of the negative impact of the global crisis we have achieved outstanding progress in its implementation.
First, in the Global Competitiveness Index drawn by the Davos-based World Economic Forum, Kazakhstan is ranked 42nd in the world.
Second, in the world ranking of the countries that create the most favourable conditions for business, the World Bank’s “Doing Business” report, Kazakhstan is ranked 41st.
Third, today, on November 30, Kazakhstan becomes a full member of the World Trade Organization (WTO). Officially, it will be announced at the meeting of the WTO General Council. This event is a milestone in the history of independent Kazakhstan. It is recognition of our country as an equal trade and economic partner. Kazakhstan’s accession to the WTO opens new opportunities for our exporters and foreign investors who will come to the key sectors of our economy.
III. Our main anti-crisis stratagem
Today, a lot depends on us, those who started our Great Kazakhstan Way and the idea of an “Eternal Nation.” We have long-term, medium-term and short-term action strategies.
Now, like any other time before, our main anti-crisis strategy includes three simple but important concepts: growth, reforms and development.
The first one is growth. Primarily, it means economic growth. With regard to the current problems, we need to restore such tempos of economic growth that will provide Kazakhstan’s entry into the top 30 of developed nations of the world. We need to find new domestic sources of growth through the encouragement of private initiative.
The second one is reform. Our reforms provide a stable economy, society and the state. At the moment, we are implementing the Plan of the Nation “100 Specific Steps.” This transformation is comparable to the large-scale reforms that we implemented in the 1990s. We crucially need deep reformation of the state and corporate management, financial and fiscal sectors.
The third one is development. In the 21st century, the main factor of development is continuous modernization of all spheres of national life. We are working on a large-scale transformation of the state, public and private institutions on the principles of Universal Labour Society, high social responsibility and targeted assistance for the most vulnerable segments of the population.
IV. Five areas of crisis and structural changes
In the near future, we need to implement comprehensive anti-crisis and structural changes in the following five areas.
First. Stabilisation of the financial sector
Our most important task is to quickly stabilise the financial system and bring it in line with new global realities.
First, we need to ensure efficient functioning of the financial sector under a floating exchange rate of the tenge. The fundamental point is that there will be no return to the practice of infinite maintaining of the national currency rate at the expense of the National Fund. The National Bank must conduct stress tests of the entire banking sector on non-performing loans. According to the results of the tests, it will be necessary to take measures for their recognition and write-offs. The banks that were unable to solve the problem of capitalisation should leave the financial system. Kazakh banks have to comply with all international standards, including those of the Basel Committee and the International Monetary Fund. It is important to enhance confidence in the national currency through expanding the tools of “de-dollarization.”
Second, in the framework of inflation targeting, the National Bank should reduce the level of inflation to 4 percent in the medium term. For this, a mechanism of flexible interest rates should be used fully.
Third, it is necessary to eliminate the existing institutional deficiencies of the National Bank. Thus, management of the Unified Pension Fund, Problem Loans Fund and other similar financial institutions should be removed from the National Bank’s responsibilities.
Fourth, starting in 2016, retirement assets must be managed by private Kazakh or foreign companies. In order to increase the profitability of retirement assets it is necessary to revise the approach to investing them. We need to treat and manage the Unified Pension Fund the same way as the National Fund.
The National Bank should regularly provide the public and financial institutions with full information on its activities. It is important to establish a normal working dialogue with all participants of the financial sector. Only after the adoption of these urgent measures, stimulation of economy can be started, including monetary methods. I believe that the new leadership of the National Bank will properly manage it. We all need to trust the national currency – the tenge. Deposits in tenge are the best tool for keeping savings of our citizens.
Second. Optimization of fiscal policy
“Living within one’s means” - this is our principle and a proven model of fiscal policy, particularly under the impact of the global crisis. Today, we register a decrease in tax revenues by almost 20 percent. VAT payments have fallen by a quarter and the corporate income tax payments by 13 percent. Raising taxes is no way out of this. It will only put additional pressure on business. To cover budgetary spending at the expense of the National Fund is a short-sighted decision. We do not know what else will turn to our side in the next few years. Therefore, my principled position is that a practice of using National Fund resources for covering current expenses should be discontinued. An annual guaranteed fixed transfer from the National Fund to the national budget should remain the only such mechanism. I entrust the Government to develop a new concept for the formation and use of the National Fund in the new global reality.
We need to revise the whole system of government revenue and expenditure. First of all, we should expand the revenue base budget. In 2017, it is necessary to introduce sales tax instead of VAT. All inefficient tax exemptions should be abolished. We need to optimize tax regimes, to leave only three levels. Those are the common one, the patent for individual entrepreneurs, and the special tax regime for small and medium-sized businesses, as well as the agricultural sector. This mechanism is designed to bring the “shadow economy” to light.
The government’s main task should be to increase fiscal transparency. This is the only way to make everyone eager to pay taxes in full.
The government should ensure the effectiveness of tax administra
Дата редактирования: 10 Июля 2018 10:06