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Integrated plan to help restore economic activity by the end of 2020 — Ruslan Dalenov

Tuesday, 19 May 2020, 11:49:01

At a government conference call chaired by Prime Minister Askar Mamin, the Integrated Plan for Restoring Economic Growth by the end of 2020 was considered. The report was made by the Minister of National Economy Ruslan Dalenov, who informed that the Comprehensive Plan was developed by the Government together with the National Bank, Atameken NCE and business associations.

The integrated plan includes operational measures to support sectors of the economy. These are tax incentives, credit expansion, measures to develop infrastructure, support domestic production, entrepreneurship and the preservation of employment.

According to updated forecasts of international organizations, the global economy will decline by 4%, and global trade — by 32% in 2020. Since the beginning of the year, oil has fallen in price by 50%, metal prices have declined by 16% on average.

“At the same time, there is a risk of a further recession in the global economy, trade and investment flows. Global and regional supply chains are disrupted, demand is declining. Today, on behalf of the Head of State, the government has taken and is implementing specific measures to maintain the economy,” said the minister of national economy.

Thus, exemptions and deferrals for taxes and social payments in the areas of micro, small and medium-sized businesses were granted. This is catering, agribusiness, shopping centers, hotels, tourism, IT companies and other services.

Significantly expanded instruments for preferential lending to SMEs. The volume of lending increased by 1 trillion tenge. This is an additional 400 billion tenge under the program Economy of Simple Things and a new 600 billion tenge through the National Bank.

The programs Business Roadmap and Economy of Simple Things significantly expanded the coverage of industries and the final rate is 6%.

“The new Employment Roadmap is being implemented. This will allow for the modernization and reconstruction of infrastructure and provide employment. To prevent the growth of the debt burden of SMEs, deferrals on repayments of principal and interest on loans for 90 days were provided. During the state of emergency, penalties and interest on loans were canceled. Public procurement procedures have been simplified for domestic producers,” explained Dalenov.

At the same time, to further support the sectors of the economy, all proposals of sectoral state bodies, the Atameken National Chamber of Entrepreneurs and business associations were considered.

The plan covers all agreed sector measures. These are manufacturing, mining, metallurgy and agro-industrial complexes, the construction industry, civil aviation, logistics, tourism, SMEs and the services sector, as well as related industries. For each industry, new measures have been worked out to quickly resolve urgent issues.

Measures to support the manufacturing industry

The mechanisms for financing the industry are expanding. So, processing enterprises, regardless of size, will receive preferential financing of working capital under the National Bank program.

Long-term agreements will be accepted by national development institutions as a “firm guarantee”.

According to the Minister of National Economy, manufacturing entities will be able to get soft loans under the Business Roadmap-2025 program. Export credit will also be provided.

“In order to provide banks with a joint loan for one borrower, syndicated lending will be introduced. In addition, an Industry Development Fund will be created. Processing enterprises will be credited through the Fund at a rate of no more than 3%,” Dalenov said.

The government supported a number of measures to promote goods of domestic producers. This is the conclusion of off-take contracts in public procurement, procurement of the quasi-public sector and subsoil users, the establishment of obligations on the use of Kazakhstani materials and equipment for recipients of preferential financing.

“These obligations will be established in licensed contractual terms to private investors. The mechanism for providing investment subsidies for the acquisition of agricultural machinery will be improved. In addition, reimbursement of transport costs of manufacturers of high value added export products will be increased to 80%. Replenishment of working capital will be facilitated by an accelerated VAT refund,” the minister explained.

Measures to support the mining and metallurgical complex

As noted by Dalenov, the limit of automatic VAT refund will be increased to 80%. This is the acceleration of tax refunds for the 1-3 quarter of 2020 for the period until the end of the year. It is planned to transfer part of the advance CIT for April 10, 2021.

The procedure for considering the provision of reduced MET rates for low-profitable deposits will be accelerated, the customs control procedure for the “processing in the customs territory” regime will be simplified. It is planned to temporarily allow the use of copies of documents as supporting documents.

Measures to support agriculture

The financing mechanism will be expanded through the introduction of forward contracts, postponement and restructuring of loans from KazAgro. In addition, guaranteed purchase agreements for agricultural products will be recognized as a “solid pledge” in banks.

It is planned to expand the category of subsidized raw materials. In pilot mode, a financing mechanism will be introduced on a “from field to counter” basis. This measure is aimed at ensuring the constant purchase and sale of agricultural products.

Measures to support the construction industry

These are measures to promptly restore the activities of industry enterprises. Special standards will be developed for the accelerated design and construction of hospitals and other facilities.

The deadlines for fulfilling government procurement of construction and installation works will also be automatically extended. In this case, it is necessary to fulfill obligations before the end of this year.

“Reliable suppliers will be able to use the insurance policy as an alternative to a bank guarantee in the construction of housing and infrastructure facilities, which will reduce the costs of companies,” said the minister.

Along with this, the Nurly Zher program will be amended at the maximum fixed selling prices. It is planned to launch a pilot project of soft loans 5-10-20. The procurement of domestic building materials will be ensured during the construction of the Employment Roadmap facilities.

In addition, the opportunity will be provided to entities of the construction industry in the SME lending program. These measures will expand the circle of builders and participants in the state housing program.

Measures to support civil aviation

Until the end of this year to support the flight condition of the ships, the import of spare parts for aircraft will be exempted from VAT, and airports — from land tax and fees for its use.

In addition, maintenance and other aviation services will be exempted from VAT for non-residents by the end of the year.

Measures to support logistics and tourism

It provides for exemption from VAT on passenger bus services on socially significant routes. Tax preferences will be provided for the implementation of tourism investment projects in priority tourist areas. These are benefits for CIT, property tax and land tax.

“In order to reduce the administrative burden by six months, a 10-fold fee for the storage of goods that are idle for more than 48 hours from the moment of notification will be canceled. The customs inspection of container trains during transit will also be canceled. And upon import, inspection will be carried out once at the destination station,” Dalenov said.

The level of subsidies for railway carriers will be maintained subject to restrictive measures. The validity of the maximum tariff levels for call services will be extended.

Support measures for SMEs and the services sector

The program Business Roadmap 2025 will include a new direction — micro-lending to micro and small businesses.

Financing will be available at a rate of not more than 6% through subsidies. Loans will be issued up to 5 million tenge for working capital and up to 20 million tenge for production needs. This will cover a wide range of representatives of microbusiness.

At the same time, training in the new format will be introduced for micro-business, which will also facilitate access to financing.

As the minister noted, to solve the shortage of collateral, the Damu Fund guarantee for loans issued under the National Bank's program for lending to SMEs for working capital replenishment will be used.

The lists of industries to which banks and microfinance organizations will provide deferred payments on loans have been expanded.

“Accounting and tax accounting for individual entrepreneurs working in a special tax regime will be simplified. The issue of reducing the load and simplifying the payment of mandatory payments for employees of individual entrepreneurs and civil law contracts will be worked out,” Dalenov emphasized.

The tax authorities will be required to preliminarily declare tax reporting, which will reduce the administrative burden on the business. Access of Kazakhstani entrepreneurs to use the Astana International Financial Center’s infrastructure will be expanded.

Measures to support employment, education, and healthcare

To promptly improve the situation on the labor market, measures are aimed at simplifying registration for obtaining unemployment status.

“When implementing the Employment Roadmap, emphasis will be placed on involving the self-employed population and expanding SMEs. In education, remote learning methods will be improved using modern remote technologies. Textbooks and teaching aids will be available in digital format,” said the minister.

In the healthcare sector, measures are aimed at preventing and protecting the health of citizens. Until the end of this year, a Biosafety Council will be created with the participation of reputable scientists and experts. Measures will be taken to strengthen the national sanitary and epidemiological service through strengthening the material and technical base.

“These measures are designed to provide comprehensive support for industries. In general, the instruments of these measures include tax incentives, improvement of regulatory policies, soft loans, implementation of state programs, infrastructure development, as well as the promotion of domestic manufacturers,” added Dalenov.

The Chair of the Association of the Meat and Dairy Union of Kazakhstan Ivan Sauer supported the Integrated Plan for Restoring Economic Growth until the end of 2020, noting that the plan presents unprecedented measures, thought out and balanced.

“I like the fact that the word ‘pilot’ appears in the materials of our document, that is, we have already avoided the broadcasting, total for the entire republic, when everyone should do just that. This will help avoid other errors. At the same time, it is necessary to support not someone in the categories of small, medium and large business, but to support in the category of successful. Only successful ones must be supported, it is necessary to stop supporting those whom no one will save, no one will support. It’s only necessary to identify effective ones, to help them further develop their production and the result will be immediately obvious,” said Sauer

The Chair of the Council of the Kazakhstan Entrepreneurs’ Forum Raimbek Batalov noted that the plan worked out very important measures for small and medium-sized businesses.

“On a weekly basis, within the framework of the Committee on Small and Medium Businesses, NCE Atameken, and the Forum of Entrepreneurs, we hold meetings together with the Minister of National Economy. This makes it possible to solve a lot of questions regarding the tax block. This form allowed us to solve those issues that had been there for months, and some for years, and put them in packages that the government had already adopted,” said Batalov.

Chair of the Union of Mechanical Engineers of Kazakhstan Meiram Pshembaev, in turn, noted that this plan is a very important project for the country. The business fully supports all measures specified in the plan. They are very relevant.

“Decisions to support enterprises are very important for us, in connection with which we will begin to jointly implement this program. This will have a good effect on the restoration of production. I want to note the importance of making changes in investment support to the law. In the framework of agreements with subsoil users, Kazakhstani content should be at least 80%. This will give a good impetus to employment,” Pshembaev noted.

As the chair of KazakhmysCopper Bakhtiyar Krykpyshev noted, today a very important issue is the preservation of employment. The price of metal is reduced by 20%.

“We are facing certain challenges, there are problems in logistics. In this connection, the implementation of the plan for this area is very important. It is necessary to support these measures. We continue social support measures. 70% of the managerial staff work remotely, the rest with the preservation of sanitary measures work in the usual manner. To ensure employment, a memorandum has been signed. The minimum wage increased to 140 thousand tenge. Funds have been allocated,” Krykpyshev said.

According to Ablay Myrzakhmetov, chair of the Atameken National Chamber of Entrepreneurs, at the beginning of May all issues on supporting entrepreneurship were discussed with the participation of the prime minister and all interested parties. Many issues have been resolved in the plan.

“For the first time in history, attention has been focused on microbusiness. More than 70% of all Kazakhstani business is microbusiness. For the first time, large financial support will be provided to microbusiness. Much attention is also paid to supporting domestic entrepreneurship. The task was set to increase the share of local content by 70%. I think this will be a great help for business,” said Myrzakhmetov.

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