The programme is seriously affected by the fragile external environment.
Industrialization is a key part of economic policy. The state needs a competitive industry and a powerful industry. That is why in its time Elbası started a policy of industrial and innovative development.
FAIID were developed in 2009 and the first five-year period began in 2010. What has been achieved, our portal was told by economist Asel Aben, head of the KISS representative office to the President of Kazakhstan in Almaty.
Where did industrialization begin?
— The policy of industrial and innovative development has been consistently pursued in Kazakhstan since 2010. What success has already been achieved?
— Program of the first five-year period – the State Program of Formed Industrial and Innovative Development for 2010-2014.
— was developed as part of the anti-crisis policy for the global financial crisis of 2008-2009.
At that time, its goal was to make the economy sustainable in the face of global crises. It focused on the development of traditional sectors, with the subsequent shift of commodity production to higher value addition. On the development of industries related to the demands of subsoil users, national companies and the state.
The program includes almost all industries, including raw materials and infrastructure development. In other words, a broad focus of priorities was outlined.
It should be noted that during this period we have laid down important basic prerequisites for launching the process of economic diversification.
For example, new laws were adopted, including “On State Support for Industrial and Innovative Activities” and amendments were made to the existing ones. There were also a number of programs, which were the main instruments of the SPAIID implementation. Among them “Productivity of 2020”, “Investor of 2020”, “Business Road Map of 2020”. It may be noted that during these years a number of infrastructural issues were also resolved. These include:
reconstruction of roads,
new transit corridors,
the circle of special economic zones has expanded, industrial zones have appeared.
The period of the second five-year period (2015-2019) was specifically focused on the development of manufacturing. As you know, the world was hit by a new wave of crisis 2014-2016, and the focus was on manufacturing as the sector most resistant to foreign economic shocks and with the potential to become a “cushion of safety” for the national economy. For this purpose 14 priority sectors of the processing industry were identified, on which the main instruments of support were oriented.
As a result, in recent years, manufacturing has been the growth driver of the national economy, with growth rates higher than those of the extractive sector.
The main tasks of the first two stages have been relatively fulfilled.
At the third stage of industrialization, Kazakhstan faces the tasks of qualitative growth of the manufacturing industry, which are focused on “development”. In the upcoming third five-year industrialization cycle, the focus of government industrial policy will be on creating an export-oriented economy with high value added.
Thus, the main task of the first five years was to create the basic conditions for active industrial development, while the second stage was to form an effective industrial SME and start entering regional export markets. In the third phase, the main objective was to establish a foothold in regional markets and become a regional processing center. The main tasks of the first two stages have been relatively fulfilled.
— What is the manufacturing industry and production in Kazakhstan in general now? What do we produce (or at least assemble)?
— Currently, the share of the manufacturing industry in the total industrial output is about 38.5%. Its structure is dominated by metallurgy (43-44%), the share of machine-building (12%), foodstuffs production (14%), chemical industry (4%), coke and petroleum products (7.5%) has increased.
The share of other industries has not yet changed significantly. Nevertheless, on the whole, over the years of industrialization the volume of production in the manufacturing industry grew by 3.5 times.
The total industrial production at the end of 2019 showed a 3.8% growth. It is still dominated by the mining sector (55.4%) with a high share of crude oil production (about 42.2%). However, some structural changes can still be noted.
For comparison, in 2010 the extractive sector accounted for 61.3% of total industrial output, with crude oil production accounting for 50.8% and manufacturing for 31.7%.
In the structure of processing, food production was only 5.7%, while mechanical engineering was just over 3% and chemical industry 0.9%. In other words, we can talk about some positive results.
We still depend on imports
— It should also be noted that in general, over the years of implementation of the two five-year period, SPIID attracted KZT 7.5 trillion to the manufacturing industry (SPIID-1 – 3 trillion, SPIID-2 – 4.5 trillion). As a result, about 500 new types of products that were not previously produced in Kazakhstan were mastered. This is:
freight and passenger wagons,
trucks, cars and buses.
As well as transformers, X-ray equipment, LED lighting, titanium ingots and slabs, pharmaceuticals, dairy products and others. The number of goods competitive on foreign markets has increased. For example, steam turbines, copper products, radiators, batteries, drinks, confectionery products and so on.
— Has Kazakhstan managed to reduce the list of imported industrial goods during this time? If so, to what extent?
— We are still dependent on imported products. The largest import volumes of manufacturing products fall into the following groups:
food and beverage production.
At the same time, the structure of imports is dominated by high and medium-tech products. They account for about 73% of the total volume. Therefore, it is extremely important to establish high value-added production facilities. The development of such export-oriented productions will allow us to integrate into global production chains in the future.
— In general, the contribution of the manufacturing industry to the GOP growth over the years of policy implementation is about 11%. How good is this indicator, especially in comparison with other countries?
— Manufacturing is the main engine of economic growth and structural change. This sector generates dynamically growing incomes, ensures high productivity, creates jobs and is a major supplier of goods.
This is where most of the everyday items are produced. Studies show that manufacturing goods account for more than half of world consumption. Thus, the manufacturing industry forms a high, about 15-16%, added value in the world GNP.
In developed countries the share of manufacturing in GOP is 10-20%, in developing countries it is about 20-35%.
We found ourselves under a “double strike”
— During the second five-year period, the share of manufacturing industry in the GOP structure increased from 10.1 to 11.6%. This is approximately at the level of developed countries. However, it should be noted that there, in total industrial output
the share of manufacturing industry reaches 90%, and we have only 38%
And in qualitative terms, labour productivity in developed countries is an order of magnitude higher. In the manufacturing industry, it has been increasing by less than 1% per year over the years. This indicates a low level of technological development in the country.
— What problems and obstacles does the industrialization program in Kazakhstan have now? How are they being solved and how successfully?
— It should be noted immediately that
the implementation of the industrialization program in our country is taking place in an unstable external environment
under the influence of economic shocks, including the fall of oil prices, weakening of the national currency, worsening of the economic situation in partner countries, and so on. But barriers in the internal environment have a more negative impact.
These include low level of control over the spending of allocated funds, corruption and insufficient level of competition. There is also a lack of working capital for modernization of enterprises’ capacities, insufficient demand in the domestic market, lack of qualified specialists, insufficient financing of R&D, and so on.
For example, in developed countries, manufacturing enterprises account for about 70% of total private sector R&D; many technologies are being developed and introduced that improve the efficiency, productivity and competitiveness of the entire economy. We need to integrate the research and development sector with the manufacturing sector, which is not yet working very well.
In addition, the world economy is plunged into recession by the coronavirus outbreak, falling oil prices and the like. And that’s a serious challenge for our national economy, too.
We are under “double strike”, if I may say so. Therefore, the relevance of the development of manufacturing industries is extremely high. The same applies to the service sectors that supply the manufacturing industry. Much will depend on the quality of implementation of the industrial and innovative development programme.
What are the results of industrialization?
— How many businesses have opened in this time and how many jobs have they created?
— Since the beginning of the second five-year period, the country has introduced more than 500 new industrial projects of the Industrialization Map with investments of about 5 trillion tenge. The projects were implemented in the agricultural sector and agricultural processing, production of construction materials, mechanical engineering, mining and metallurgical complex, chemistry, light industry, etc.
The launch of these projects has created more than 80,000 permanent jobs. Thus, 54 projects have been implemented in the chemical industry over the years of industrialization, and more than 4,000 jobs have been created. In the production of construction materials, 302 new production facilities have been set up for a total of 458.8 billion tenge, and more than 20,300 jobs have been created.