Since the first five-year plans of industrialization, thanks to the proactive industrial policy of the state, the manufacturing industry has been on the rise even during the global economic crises. State support and incentive measures helped that over time, business interest in this sector has only increased. The figures speak for themselves: the share of the manufacturing industry in the total production structure increased from 32.3 to 44.6%, the level of labor productivity in processing increased by 1.7 times.

According to the results of 2020, for the first time in 10 years of the industrialization policy, the share of the manufacturing industry (13.1%) in the GDP structure exceeded the indicators of the mining industry (12.2%). The largest contribution to the growth was made by the metallurgical industry, mechanical engineering, food production, construction materials and other industries.

In just 10 years, more than one and a half thousand projects worth KZT 9.1 trillion  have been launched in the republic under the state industrialization program. New enterprises demonstrate a wide multiplicative effect: the structure of the manufacturing industry has changed, more than 200 thousand permanent jobs have been created, the infrastructure of the regions is developing, the production of more than 500 new types of products that were not previously produced in Kazakhstan has been established.

The number of competitive goods from Kazakhstan has increased in foreign markets – steam turbines, copper products, radiators and batteries. For example, the production of titanium ingots and alloys is focused only on a foreign buyer. Kazakhstan's titanium occupies 11% of the world market, and 17% in the aerospace industry.

The volume of production in mechanical engineering increased by 4.8 times, the product range was replenished with locomotives, electric locomotives, passenger cars, mining and oil and gas equipment.

New features

Kazakhstan took a course for the development of the manufacturing sector in 2009, having adopted the state program of accelerated industrial and innovative development for 2010-2014 in the wake of the global financial crisis. It started in difficult conditions: the primacy of the raw materials sector, the shortage of electricity with high energy intensity, undeveloped transport infrastructure did not contribute to the growth of industry in any way. On the contrary, the technological lag and underutilization of domestic enterprises led to a decrease in the share of the manufacturing industry to 10.9%.

In response to these challenges, the First President - Elbasy, Nursultan Nazarbayev, said that "industrial development is our chance in the new decade, new opportunities for the development of the country."

The FIIR state program (State program for accelerated industrial and innovative development of the Republic of Kazakhstan) supported all sectors of the economy, and the first five-year plan of industrialization, in fact, became an anti-crisis one. Thanks to the course taken to diversify the economy in 2010-2014, it was possible to maintain the pace of processing development at the level of 10% of GDP, while the share of the mining sector gradually began to decline.

The first stage of industrialization was aimed at providing the country with high-quality infrastructure. About 4 thousand km of highways were built and reconstructed (Western Europe – Western China, two transit corridors Center – South and Center – East), about 1,700 km of railways (Uzen – the state border with Turkmenistan, Zhetygen – Korgas, Beineu – Zhezkazgan, Arkalyk – Shubarkul).

The issue of electricity shortage was solved, for which the heat and power systems of regions and cities of republican significance were developed, substations were built and thermal power plants were expanded. The construction of engineering communications for special economic zones was started, 10 SEZs and 19 industrial zones began to function. Broadband Internet networks have been built, logistics centers have been created all over the country.

During the second stage of industrialization, key chemical and petrochemical industries and oil refineries were created and modernized. Automobile clusters have been formed, the production of motor vehicles is already being carried out in several regions at once.

Domestic enterprises have mastered the full cycle of gold production – from its extraction to the smelting of bullion, and now our gold replenishes the gold reserves of Kazakhstan.

The production of titanium ingots for world aviation was launched, the production of titanium products was started, several modern factories in the copper industry were opened.

As Nursultan Nazarbayev noted, it was the results of industrialization that became one of the main stabilizing factors in the crisis years 2014-2015, when oil prices fell sharply. In the Message to the People of Kazakhstan-2018, the First President of the Republic of Kazakhstan stressed that industrialization should become the flagship of the introduction of new technologies. Moreover, to be more innovative, to use all the advantages of the new technological order 4.0. For this, according to the Head of State, it was necessary to develop and test new tools aimed at modernizing and digitalizing our enterprises with a focus on exporting products. They should primarily stimulate the transfer of technologies.

Processing took the lead

Thanks to the creation of a cluster of railway engineering, the production of electric locomotives, passenger cars, railway wheel sets and axles, plastic rail mounting elements and switches was established. The factories of the republic have mastered the production of rails of increased-120-meter length, which have no analogues in the CIS and are intended for high-speed highways.

The country began to provide the domestic market with construction materials of its own production. Over the past decade, the existing modern cement plants have been modernized and put into operation, which fully cover the needs of construction projects in cement. Today, there are 15 modern cement plants operating in the country. More than 10 new house-building plants and the same number of asphalt concrete plants have been launched.

The food industry received a new impetus. More than 30 poultry farms have been built and modernized throughout the country, large fat-and-oil complexes and confectionery production plants have been reconstructed in several regions.

In general, over the years of industrialization, production has increased and non-commodity export items have been formed for more than 100 commodity items, the export of which amounted to US $ 183 billion. Since 2010, the volume of investments in fixed assets has increased 2.6 times: from KZT 413.1 billion in 2010 to KZT 1,077. 8 billion  in 2020.

From 2010 to 2020, more than US$ 248 billion of foreign direct investment was attracted to the economy. Today, every 6th dollar is accounted for by the manufacturing sector.

Products produced in Kazakhstan are consumed by more than 120 countries, the main ones are China, Central Asia, the countries of the EAEU and the European Union.

– It is especially noteworthy that the projects of new industrialization have already begun to "feed" the country. In 2010, the manufacturing industry replenished the budget with KZT 450 billion, behind the trade (KZT 668 billion. - Ed.). And already in 2019, the amount increased to KZT 1,477 billion, it was almost equivalent to tax deductions from three sectors of the economy – agriculture, trade and transport (KZT 1,564 billion. - Ed.). And moreover, processing has outstripped each sector separately – " says Marat Bopazov, Deputy Chairman of the Board of Kazakhstan Industry and Export Center «QazIndustry» JSC. – This is proof that the country is making the right emphasis on further economic development, mastering new industries and competencies, providing high-quality jobs.

At the same time, a decade is clearly not enough for radical economic changes. It took many rapidly developing Asian countries 20-30 years to significantly change the structure of their economies. It is also necessary to take into account the fact that our industrialization was carried out under the negative influence of external shocks. The decline in commodity prices in 2015-2016, the devaluation of the national currency, the deterioration of the economic and political situation in the trading partner countries. These factors had a negative impact on the state budget and business: planned funding was not allocated, the implementation of a number of projects was extended or postponed.

However, many difficulties have been overcome. The Ministry of Industry and Infrastructure Development recently reported that the enterprises introduced in 2010-2020 produced products in the manufacturing industry in the amount of about KZT 4.8 trillion.

Development horizons

Last year, the third stage of industrialization was launched. The main emphasis is placed on the development of the manufacturing industry, which would be competitive in the domestic and foreign markets. The state will primarily support enterprises that produce goods with a deep level of processing. This will allow us to diversify the economy, reduce dependence on raw materials exports, as well as increase production with high added value, which in the future will completely change the structure of exports.

- The Government's measures will focus on the development of new areas of processing, as well as on improving measures to stimulate and support industry. According to the results of the first two stages, we analyzed the effectiveness of the functioning of support and incentive systems – they will be optimized for greater and more effective coverage of industries," Marat Bopazov said.

It is impossible not to take into account the negative impact of the global pandemic, because the third stage began during the coronacrisis. And it is impossible to say that Kazakhstan will be able to cope with its consequences alone. The Kazakh economy will depend on the main trading partners and the situation in their markets. But, as the experience of the first two stages of industrialization shows, only by increasing the manufacturing industry can we really talk about economic diversification.

According to experts, the successful implementation of projects of the third five-year plan of industrialization will allow us to enter a qualitatively new trajectory of development of the manufacturing industry.

Only last year, 201 projects worth KZT 916.8 billion were implemented in Kazakhstan within the framework of the Industrialization Map and Business Support Maps of the regions, 18.6 thousand new jobs were created.

For example, in 2020, in the Karaganda region, Linde Gas launched a plant for the production of industrial gases (oxygen and nitrogen) necessary for steel production, medicine and electronics production. In the East Kazakhstan region, Ulba-TVS LLP has established the production of fuel assemblies for nuclear power plants as nuclear fuel. The production of Hyundai passenger cars has been introduced in Almaty with a capacity of 45 thousand units per year, which will provide a twofold increase in the capacity of the domestic automotive market. The transition to small-node assembly of cars with stamping of the body and its painting will begin.

According to QazIndustry, complexes for the production of nitrogen-phosphorus and mineral fertilizers with a capacity of 1 million tons per year are being built in Karatau, in Zhambyl region – for the production of phosphorus trichloride and technical glyphosate, in Kyzylorda – calcinated soda. Modernization of the plant in the Mangystau region continues with an increase in the production of ammonium nitrate to 330 thousand tons per year.

With the completion of the construction of the first stage of the integrated gas chemical complex in the Atyrau region, the production of polypropylene will be established in the country.

In addition, documentation is being developed for the construction of the Karaganda plant of complex alloys, a complex for the production of liquefied hydrocarbon gases and polymers in the Pavlodar region, increasing production to 5 million tons of steel in Temirtau, expanding the production of base oils in Shymkent.

In recent years, projects for the production of products of the 4th and 5th stages have been actively introduced, which meets the need to increase the country's competitive advantages, increase the presence of Kazakhstan in the world value chains of metal products. A special breakthrough in the transition to deep processing was achieved in the aluminum industry. This was facilitated by the opening of the Kazakhstan Electrolysis Plant with the participation of Elbasy in 2010. Our enterprises have mastered the production of aluminum profiles, aluminum radiators and alloys, powders and wires, automobile aluminum wheels. However, according to experts, the development of higher processing is hindered by high prices for metals within the country.

Today, metallurgical enterprises in Kazakhstan sell metals for export and the domestic market, based on the stock quotes of the London Metal Exchange (LME). According to statistical data, the average price of metals on the domestic market is higher than the average export prices. This automatically reduces the competitiveness of domestic producers in comparison with external competitors.

In addition, processors, buying raw materials from metallurgists, make a 100% prepayment, but then the goods are shipped within two weeks.

This rule makes it difficult to fulfill urgent orders received by processors.

To ensure equal conditions for the purchase of metals, the possibility of changing the pricing formula for metals within the country, as well as changing the payment terms for metal, is being considered.

In addition, according to the MIID in order to meet the demands of the domestic market, it is proposed to introduce quotas for a certain part of the produced raw materials and tax incentives. These tools will be accompanied by monitoring of the prevention of resale of metals for export by domestic processors.

Landmark – deep redevelopment

In the message to the people, President Kassym-Jomart Tokayev stated the need to increase production in the manufacturing industry by at least 1.5 times in 5 years. Moreover, the development of new processing areas is put at the forefront of industrialization.

On behalf of the President, a unified Law "On Industrial Policy" has been developed, the draft of which is currently under consideration by Mazhilis deputies of the Parliament.

According to Qazindustry experts, the document will undoubtedly be of great importance for the development of the domestic industry.

The trade policy will include issues of product promotion both on foreign and domestic markets. The draft law provides for the creation of conditions for the introduction of Industry 4.0, the commercialization of scientific results, taking into account the needs of manufacturing enterprises and the training of qualified personnel.

Within the framework of public procurement and increasing local content, work will continue with large customers to assist in concluding contracts with domestic manufacturing enterprises. The annual Subcontract Exchange will help to expand the relations of suppliers with large customers.

Special attention will be paid to providing industrial infrastructure for production workers in the territories of SEZs and industrial zones.

– It is export orientation that should become the core of economic policy and a tool for overcoming the "middle income trap", –  Marat Bopazov summarised.

Competition in foreign markets will stimulate our enterprises to become more efficient, the most successful ones will eventually become drivers of the economy and sources of income for citizens.