New economic policy indicated for Kazakhstan within the strategy «Kazakhstan 2050»

In December 2012 the President of the Republic of Kazakhstan addressed new political course of the state to the people of Kazakhstan.

The new political course "Kazakhstan-2050" reflects a new level of long-term forecasting of the economy and politics. The third phase of the industrial revolution based on new factors of scientific and technological progress rapidly and widely covers all countries, objectively determines the integration of their economies and social life, modifies cultural identity of peoples and nations. Strategy "Kazakhstan-2050" for the first time brings global trends in scientific, technological and socio-economic progress at the country level: or the first time, not only in the CIS, but also in the leading developed countries of the world who are experiencing serious difficulties of the global financial crisis, and they have no time to setting such a long-term strategic objectives of global development. Well-known foreign experts from Europe, America and Asia have already confirmed it. Such a long-term strategy defines the place and role of Kazakhstan in the future of the Eurasian Economic Union, and to a considerable extent appears to be guarantee of its political independence.

There are various examples of small and medium-sized states with a vast territory and small demographic potential, which reached the level of advanced, successful cooperation in today's globalized world and confidently defend its sovereignty: for example, Sweden, Norway, Finland, Taiwan, etc. The new strategy of Kazakhstan is the guarantee of the successful future of our country. The first half of the XXI century must become a passionate stage of economic development of Kazakhstan, its state and spiritual progress. Fundamental objectives of a new stage of development associated with the third industrial revolution based on information and nanotechnologies, based on sound economic potential created by the implementation of the Strategy for the years 2030 and within the framework of the Industrial and Innovation Program of the Republic of Kazakhstan.

One of the priority tasks set by the President of Kazakhstan has to be a new formulation of the strategic long-term planning as an attribute of a strong state, a developed economy and " society welfare ". In the coming post-crisis the incremental dynamics of social and economic processes will change and accelerate not only at the level of the advanced economies, but also of reaching and catching up.

Where is Kazakhstan going? According to the goals determined in the New political course, Kazakhstan must enter the top 30 club of most developed states in the world by 2050. The competition among developing countries for a place in its list will be intense. The nation must be ready to face changes in the global economic climate, realizing clearly that the desired spot is guaranteed only to those with the strongest economies.

The state must work with dedication and inspiration, not losing a sight of the primary objectives:

• Further developing and strengthening statehood;

• Transitioning to new principles of economic policy;

• Comprehensive support for entrepreneurship will be a leading force for the national economy;

• Forming the new social model;

• Creating modern and efficient education and healthcare systems;

• Increasing accountability, efficiency and functionality of the government;

• Setting adequate international and military policy that is responsive to new challenges.

In accordance with these tasks the Government will need to immediately develop the National action plan.

This important document must include all specific orders and provide for personal responsibility of the heads of executive, legislative and judicial branches of power. The Presidential Administration must take the preparation and further implementation of the strategy under special control.

The major directions identified by the Leader of the Nation are firstly concerned with determining a new economic course.

The economic policy of the new course is all around economic pragmatism based on the principles of profitability, return on investment and competitiveness

The essence of economic policy of the New course – is universal economic pragmatism. What does this mean?

Firstly, it means adopting all economic and managerial decisions based purely on economic feasibility and long term interests.

Secondly, it involves defining new markets where Kazakhstan can participate as an equal business partner and create new sources of economic growth.

Thirdly, it infers creating a favorable investment climate to help build economic capacity, profitability and return on investments.

Fourthly, it implies creating an effective private sector economy and developing public private partnerships. Kazakhstan must do this by stimulating exports with state support.

Another key condition of success for our 2050 policy will be the right people to back it up. To ensure these people are in place the government of Kazakhstan must:

• Enhance the managerial resources and potential that we possess;

• Introduce modern management tools and principles of corporate governance in the public sector;

• Exploit the benefits of international divisions of labor. In particular, attract external cadre resource for implementation of some of the tasks of the New course via the outsourcing programs. Kazakhstan should also attract the best foreign specialists in the open market and invite them to work in our country.

• The use of managers with extensive international experience and knowledge will have a dual effect: the state will modernize management of our production and teach our own domestic human resources. This is a new practice for the state.

Another important step is concerned with modernization of the macroeconomic policy.

In order to implement an efficient budgetary policy, Kazakhstan should:

• Adopt new principles of budgeting policy. The government must spend only within its means and reduce the deficit as much as possible. It is necessary to build up reserves for a rainy day, ensuring Kazakhstan’s safety in the long run;

• change its attitude towards budgeting processes - it must become as careful and thoughtful, as to private investments. In other words, not a single tenge from the budget should be wasted.

• should focus the budget of the state on long-term, productive national projects that include the diversification of the economy and development of infrastructure.

Projects for investments must be selected in a strict manner, based on feasibility and rate of return. Kazakhstan must keep in mind that even the most modern projects become a burden to our budget if they require expenditures for maintenance, but do not bring revenues and do not solve the problems of our citizens.

Tax policy of the state is to:

• introduce a favorable tax regime for those employed in areas of production and new technologies. Kazakhstan must conduct a revision of all existing tax preferences and maximize their efficiency;

• continue the policy on liberalization of the tax administration and on systemizing customs administration. It is necessary to simplify and minimize tax reporting;

• stimulate market participants to compete, instead of searching for new ways of tax avoidance;

• introduce pragmatic reduction of tax supervision that will minimize the dialogue between the economic entities and tax authorities. In the next five years everyone needs to move to electronic online reporting;

• introduce the practice of tax credits starting from 2020. In doing this our main goal will be to stimulate investment activity among entrepreneurs;

• be socially oriented. Starting from 2015 it will be necessary to develop a set of stimulating measures, including the practice of tax exemptions for companies and citizens who invest their own funds in education and medical insurance for themselves, their families and their employees.

Future tax policy must stimulate internal growth, domestic exports and stimulate individual’s savings and investments.

Monetary policy of Kazakhstan will infer the following steps:

• Considering the unfavorable global economic environment the government must ensure the safety of the earnings of each of our citizens and maintain a reasonable inflation level with respect to economic growth. This is not simply a macroeconomic issue, this is an issue of social security of the country. This will be the major task for the National Bank and the Government starting from 2013.

• Kazakhstan’s banks, in turn, must fulfill their purpose and meet the demand of the private sector for loans. At the same time we must not weaken our control over financial system. It is necessary to help clear banks from problematic loans and start active work on solving funding issues. For that the National Bank and the Government, under coordination from the Presidential Administration, need to develop a conceptually different and new system of monetary policy, aimed at providing economy with necessary monetary resources.

Policy of managing public and external debt

• Kazakhstan must constantly monitor the level of public debt and keep it under control. Public debt must remain at a moderate level. This is a crucial task, because only that way we will be able to ensure the stability of our budget and national security in conditions of global instability.

• the state must strictly control the level of quasi-public sector debt.

Touching the issues of the infrastructure development, Kazakhstan should:

• adopt a whole new approach towards infrastructure development. Infrastructure must expand the possibilities of economic growth in two key ways. First of all, the state should integrate the national economy into the global environment, and secondly move towards regions within the country;

• understand how important it is to focus attention on exit routes from the country and create transport and logistics facilities outside Kazakhstan. The nation must think outside the box and create joint ventures in the region and throughout the world - Europe, Asia, America - building ports in countries with direct access to the sea and developing transport and logistics hubs at nodal transit points. In that regard we need to develop a special program “Global infrastructural integration”;

• develop its own transit potential. Today the government is implementing a number of large country-wide infrastructure projects that should lead to doubling the capacity of transit across Kazakhstan by 2020;

• be oriented towards one key goal – promoting exports to world markets where there will be long term demand for our goods and services;

• Infrastructure building must also meet the profitability criteria;

• Infrastructure should be built only in places where this leads to the development of new businesses and jobs;

• Within the country we must create “infrastructure centers”, to ensure coverage of remote regions and places with low population density with vitally important and economically necessary infrastructure facilities. Ahead of that we need to ensure transport infrastructure.

When discussing the issue of modernization of the system of managing the state assets, Kazakhstan is not a large economy on a global scale. The state needs to manage it very effectively. The country must work as a single corporation, and the state must serve as its core.

The strength of corporate thinking lies in the fact that all processes are considered as a whole. Public sector managers at all levels must learn and adopt the same business thinking.

The quicker we build up the production potential of the country, the faster Kazakhstan will become a key player in the global market. The driver of this economic policy would be the National Fund. Resources of the National Fund should be directed at long term strategic projects. In 2013 the accrual of money in the National Fund must be continued, but the country needs to use those funds in a very rational and thoughtful manner. The state, represented by national companies must stimulate the development of the economy of the future and consider the sectors that will emerge as a result of the Third industrial revolution. Domestic industry must consume the newest composite materials that we must produce in our country. The state must stimulate development of transit potential in sphere of information technologies. The country must ensure that by 2030 at least 2-3% of global information flows go through Kazakhstan. This figure must double by 2050. It is necessary also to stimulate private companies to invest funds in research and innovation. The country can reap real benefits only where there is demand for our new technologies. In the worst case scenario innovation becomes just a waste of money. The policy of selective support of specific companies and industries needs to come to an end. The government must support only those industries that execute socially important, strategic functions and can demonstrate their effectiveness.

Introducing the new system of managing natural resources means that the state must exploit resources as important strategic advantage of Kazakhstan to provide for economic growth and large external political and economic agreements. It is necessary to accelerate the access for our commodities on international markets, which in the case of a new financial collapse would be destabilized. Kazakhstan's major importers might significantly reduce the purchases of commodities so that the prices could fall sharply. Kazakhstan's strategy will allow to stay ahead of the curve and accumulate resources before potential market destabilization begins. These resources will then help the country overcome the hard period. Technological revolution changes the structure of commodity consumption. For example, the introduction of composite technologies and new types of concrete - causes depreciation of iron ore and coal reserves. This is another factor for us to accelerate the pace of extraction and delivery to world commodity markets exploiting the current global demand. Maintaining the status of a big player on hydrocarbon commodity market, we must develop the production of alternative energy sources, actively seeking to introduce technologies using solar and wind power. By 2050 alternative and renewable energy sources must account for at least a half of country’s total energy consumption.

If the nation wishes to have revenues from commodities in 35 years, then it needs to start preparing now. Kazakhstan needs to develop a special strategy – defining priorities and partners, in order to plan out the work for years ahead, as this is done by all large corporations and conglomerates.

Main directions of strategy development are the following:

• To ensure that regions are interested in attracting investments, it is necessary to ban the moratorium on subsurface use permits.

• To move from simple delivery of commodities to forming partnerships in area of energy resource processing and exchange of new technologies. By 2025 we must fully satisfy our internal market with fuels and lubricants in accordance with new ecological standards.

• To attract investors to the country only on the conditions of transfer of modern technology for extraction and processing. Kazakhstan must allow investors to extract and use our raw materials only in exchange for creating new production facilities on the territory of our country.

• Kazakhstan must become the regional magnet for investment. The country must become the most attractive place in Eurasia for Investments and technology transfer. This is crucially important. To do this Kazakhstan must demonstrate to investors its advantages.

Kazakhstan was the first CIS country actually initiated a policy of "green development path" at the level of state policy. "Energy of the Future" - a worldwide problem, and pushes the state with immense natural energy resources in the name of global security and stability. Movement of the "green revolution" acquires a new content not only as a product of the modern scientific and technological progress but also as an objective process of energy saving. It is at the same time it is an objective for sustainable development of the world community and the primary condition being of the population, not only of the industrialized developed states, but also of those that are still developing their economies that have alternative sources of non-conventional and renewable sources of energy.

The upcoming EXPO 2017 in Astana will provide a powerful impetus for transition of the country towards the “green” path of development. The world’s best achievements in science and technology will be presented in the capital of our country. Our citizens would be able to witness the “energy of the future” with their own eyes.

Theoretical, methodological, social and political development and justification of its stages, ways and means to strengthen the economic potential of Kazakhstan and its sovereignty at the new phase of the industrial revolution will require the joint efforts of scientists, political leaders, administrative and planning bodies.

RESOURCES

1. “Governmental Program on Accelerated Industrial-innovative development of the Republic of Kazakhstan for the years 2010-2014” from May 15, 2009.

2. Address by the President of the Republic of Kazakhstan, Leader Of the Nation, N.A. Nazarbayev: «Strategy Kazakhstan 2050 - New Political course of the established State» from 18.12.2012.

3. The Report of the Government of the Republic of Kazakhstan on the results of social and economic development of the country over the years 2010-2012.

4. The Message of the President of the Republic of Kazakhstan "Social and economic modernization - the main vector of development of Kazakhstan" from 27.01.2012

5. www.aef.kz