Results for 10 months of 2020 show 17% increase in production of domestic mechanical engineering — interview with Meiram Pshembayev

In his Address, the Head of State has set the task to create a diversified and technologically advanced economy, increase production of manufacturing industry by 1.5 times. To this end, the state is improving the mechanisms for supporting domestic producers; the Law "On Industrial Policy" will be adopted. Mechanical engineering of Kazakhstan continues its dynamic development in modern realities. The industry has significant potential for expanding production and increasing exports. In an interview with, the deputy of the Majilis of the Parliament, Chair of the Board of the Union of Mechanical Engineers of Kazakhstan Meiram Pshembayev told in more detail about the development of the industry.

— Meiram Kudaibergenovich, what is the general state of the machine-building industry in the country? What is produced? What is the role of mechanical engineering in the economy of Kazakhstan? What are the results in the machine-building industry for 10 months of 2020?

— Over the past 10 years of industrialization in mechanical engineering, the volume of production has quadrupled, investments increased 2.5 times, the volume of exports has grown 3 times.

Over the years of implementation of the industrialization program, 128 projects have been implemented for about 367 billion tenge, about 16 thousand jobs have been created.

Over the years of industrialization, new sub-sectors have emerged: oil and gas engineering, the automotive industry, and railway engineering.

The industry began to move from the production of components and spare parts to the production of final products.

End products: diesel locomotives, electric locomotives, passenger and freight cars, trucks and cars, buses, batteries, wheeled tractors, combine harvesters, pipeline fittings, cables and wires, LED lamps, pumping equipment, passenger elevators.

Such transnational companies as General Electric, General Motors, Alstom, LG, CLAAS, JAC, KAMAZ and others came to the country.

In this regard, the products of the above-mentioned engineering industries will not only be able to provide the domestic market of our country, but also actively export.

Now our enterprises export to such countries as: Russia, China, Azerbaijan, Tajikistan, UAE, Turkmenistan and others.

Despite the crisis, domestic machine builders practically did not stop production.

According to the results of 10 months of 2020, the growth in the volume of production of domestic mechanical engineering amounted to 17%, in monetary terms, 1.4 trillion tenge.

For 10 months of 2020, an increase in production volumes took place in the following mechanical engineering sectors:

  • Automotive by 54%;
  • Railway engineering by 1.9 times;
  • Agricultural engineering (tractors, reapers, combines) by 44%,
  • Electrical engineering by 3%.

The industry has a high multiplier effect, being a complex diversified segment of the industry, it has a positive effect on other sectors of the economy as a whole, contributes to the growth of competitiveness and the complication of the economy, technological progress and an overall increase in the quality of life of the population.

— Last year, a serious step was made in the machine-building industry of Kazakhstan. The government approved the Roadmap for the development of mechanical engineering in the Republic of Kazakhstan for 2019-2024. A specific course has been set. What does Kazakhstan's mechanical engineering expect in the coming years? What results do you expect from the implementation of this Roadmap?

— In the Roadmap for the development of mechanical engineering for 2019-2024, for the first time, such institutional measures as the development of the Law of the Republic of Kazakhstan "On Industrial Policy" and the creation of the Industrial Development Fund are outlined.

The president of the country in his Address to the people of Kazakhstan set the task of providing machine-building enterprises of Kazakhstan with high-quality and affordable raw materials.

To date, the Industry Development Fund has been created, and the draft Law "On Industrial Policy" will be submitted to Parliament by the end of this month. The adoption of the law and the creation of the fund will contribute to the growth of not only mechanical engineering, but also the manufacturing industry in our country as a whole.

It is very important to provide quality raw materials for further improvement of the potential and growth of the manufacturing sector as a whole. Today, domestic machine builders are forced to purchase raw materials mainly from abroad. Every year we purchase up to 240 thousand tons of cast iron and castings for the production of machinery, 467 thousand tons of forgings and billets, alloyed and unalloyed steel. Raw materials are very important in the formation of a competitive price, especially for exports and ensuring domestic demand. Therefore, the President of the country has set the Government the task of building factories, introducing new production facilities and meeting the needs of 700-800 thousand tons of metal annually in the near future. In the medium term, we think that the figure of a million tons will also be close.

There are a number of enterprises in Kazakhstan that have experience in the production of cast and forged blanks, and are also interested in its development and modernization.

To resolve this issue, it is advisable to provide targeted measures of state support in the form of long, cheap money through the established Industrial Development Fund or temporary entry into the capital of Kazyna Capital Management.

The implementation of these projects will strengthen the basis of mechanical engineering, for the development of types of final products, reduce dependence on imports and increase the competitiveness of manufactured products, and in the future go to export.

The roadmap provides for the effective development of not only machine-building enterprises, but also a wide range of manufacturing enterprises.

The main activities foreseen for this year have been successfully completed.

When implementing further measures to support enterprises, the implementation will be carried out in the following areas:

  • deepening localization by tightening counter-obligations of manufacturers;
  • creating foundries for the production of blanks and the provision of a high-quality raw material base;
  • improving the system of government procurement of engineering products by developing a system of long-term off-take contracts;
  • increasing the volume of financing for the program of concessional lending and leasing of engineering products;
  • increasing the share of costs reimbursed by the state when promoting the export of finished goods by 80%.

In general, this is not limited to the mechanical engineering of Kazakhstan. This is a huge range of industries in our country. This is the production of diesel locomotives, electric locomotives, freight cars, combines, tractors, fodder processing equipment, oilfield, motor transport equipment. We must create such conditions so that enterprises can sell their products to consumers through leasing schemes. This mechanism will spur the growth of the entire industry as a whole and will give an impetus to the development of related branches of engineering.

— The roadmap includes rules for initiating the creation of the Kazakhstan Industry Development Fund. The Fund was established in September 2020. Tell us about his key priorities. Why was it created and what will it do?

— The Fund was created on the basis of the current financial operator of state programs for industrial development and Nurly Zhol — DBK-Leasing.

As the Head of State noted in his Address to the people of Kazakhstan on Sep. 1, 2020, the most important task facing Kazakhstan is the full disclosure of its industrial potential.

The government has been tasked with increasing the competitiveness of manufacturing enterprises in the domestic and foreign markets.

The creation of the fund will expand the measures of state support for domestic manufacturing enterprises.

It will aim to provide affordable financing for domestic enterprises at below market rates.

The key priority of the fund will be the implementation of strategic investment projects within the framework set in September 2020 by the Head of State in his Address to the people of Kazakhstan.

That is, the creation of the fund today, along with other instruments of financial support for the manufacturing industry, will be focused on financing manufacturing enterprises.

— The development of competitive mechanical engineering is impossible without modernization of production and the introduction of innovations. In this regard, what mechanisms of state incentives, in your opinion, are the most effective?

— In general, if we take the current dynamic development of mechanical engineering, the growth of production volumes, the development of new types of products, new types of industries, we can state de facto that the industries that have appeared today and function in our country, producing equipment of various spectrum, it became possible to build new carriages and modernization of existing enterprises. One of the major support measures was the development of a state program for industrial and innovative development of our country in 2010. This has become the foundation and potential for the development of our industry, including mechanical engineering. Today the state is carrying out the second State Program of Industrial and Innovative Development. We have started implementing the third industrial program. In addition, other support measures are in force — this is the Roadmap for the development of mechanical engineering, the Roadmap for the modernization of enterprises. Due to such programs, many existing enterprises have been modernized and today they have the opportunity to produce competitive products and work for export.

The provision of state support in order to help enterprises and their modernization is carried out through the provision of financial support. These are soft loans, leasing, granting, cost recovery.

Within the framework of measures aimed at increasing labor productivity, JSC QazIndustry reimburses costs in the amount of 40% in the following areas:

  • improvement of technological processes, the maximum amount of compensation is 60 million tenge;
  • increasing the efficiency of production organization; maximum compensation amount is 60 million tenge.

Development Bank of Kazakhstan JSC provides services for lending to current activities, intermediate and mezzanine financing, financing leasing transactions, as well as providing guarantees.

JSC Damu Entrepreneurship Development Fund provides support in the form of lending, subsidies and loan guarantees.

In general, the state supports the engineering industry. Today there are about 100 government support measures. There are also measures of state support provided for by the Tax Code. This year, changes have been made, conditions have been created for exemption from VAT, customs duties for enterprises that will increase their localization in the automotive industry, agricultural machinery. To increase the localization of Kazakhstani content, it is necessary to produce more spare parts, assemblies, units in our country. For this, the issue goes along the chain — the purchase of equipment, raw materials, the exemption of equipment and machine tools when imported to Kazakhstan from VAT and customs duties. This chain has started working, and we hope that all these measures, which are being taken by the state together with business, will help build up and intensify the processes of modernization of our enterprises. The next step will be to increase exports and the quality of products.

— One of the most important conditions for the successful development of mechanical engineering is filling the deficit of highly qualified personnel. What measures are being taken by the state in this direction? What kind of specialists does the industry need?

— Considering that one job created in mechanical engineering has a multiplier effect, creating up to 7-8 workers in related industries, it is this job that is intended to become a source of recovery in the post-pandemic period.

Within the framework of the Roadmap for mechanical engineering for 2019-2024. the task of providing the industry with qualified human resources has been set.

The issue of improving the system of dual education is being worked out in terms of establishing conditions for the joint financing of costs during industrial practice: 70% state / educational institution, 30% employer.

Dual education, along with the optimal transfer of professional experience, allows you to establish your position in the workplace. Businesses benefit from new ideas and impulses from learners.

This training system is one of the possible ways to combine the interests of business, the future specialist and the state.

The dual training system is practiced in a number of countries, especially in Germany, Austria, Switzerland, Denmark, the Netherlands and France, in recent years in China.

In the countries of the European Union, the organization of general and vocational education and the development of educational policy are increasingly based on dynamic and flexible social partnerships.

The involvement of employers in vocational training of young people is especially actively manifested in the organization of monitoring of labor markets and educational services. This allows you to harmonize the needs, structure of professions and adjust the content of training, taking into account the requirements of the economy.

Over the past 5 years, the number of people accepted for training in organizations of technical and vocational education has increased.

The specialty "Maintenance, repair and operation of motor transport" is most in demand among applicants of colleges and secondary specialized educational institutions, the share of which in the total number of applicants for mechanical engineering specialties is 44.6%. In addition, a significant share is occupied by the professions such as Welding (22%) and Operation, repair and maintenance of rolling stock of railways (9.1%).

It should be noted here that among the top 10 prestigious professions in the world, 40% are somehow directly related to mechanical engineering — these are nanotechnologists, IT specialists, technical and executive directors in various industries, pilots.

The Union of Mechanical Engineers of Kazakhstan, within the framework of the Project for the Development of Labor Skills and Stimulation of Jobs, implemented by the Ministry of Labor and Social Protection of the Population with the technical support of the World Bank, has successfully carried out work on the development of sectoral frameworks of qualifications and professional standards in the direction of Mechanical Engineering and Metalworking.

Today in Kazakhstan there are more than 3.8 million young people, or 21% of the total population. To address the issues of training qualified personnel, projects such as Zhas Kasipker and Zhas Maman are being implemented.

Within the framework of the Zhas Kasipker program, 20 thousand people are trained. According to the terms of the program, at least 20% of students must start their own business.

According to forecasts, the coverage of the Zhas Maman project will amount to over 210 thousand young Kazakhstanis. The project provides for the training of specialists in 100 of the most demanded industrial and service professions on the basis of 180 colleges and 20 higher educational institutions, equipped with modern equipment.

For 2019-2021, it is envisaged to increase the number of project participants to 30 thousand people. Such projects in the post-Soviet space are unprecedented, a similar practice exists only in the EU countries.

If our youth receives high-quality vocational training and learns professions in demand, this will contribute to the development of social lifts and an increase in the middle class.

— An International Center for the Development of Oil and Gas Engineering will be created in Kazakhstan. A corresponding agreement was recently signed. Tell us about the goals of creating this center. How will the support for domestic producers be shown?

— On Nov. 30, 2020, as part of the execution of the instructions of the Head of State for the development of the machine-building industry, an agreement was signed on the creation of an International Center for the Development of Oil and Gas Machine-Building.

The document was signed by Minister of Energy Nurlan Nogayev, First Vice Minister of Industry and Infrastructure Development Kairbek Uskenbayev, PSA General Director Beket Izbastin, Karachaganak Petroleum Operating Project Manager Edwin Blom, North Caspian Operating Company Managing Director Richard Hove and Tengizchevroil General Director Imer Bonner, in addition, I personally signed it on behalf of the Union.

The purpose of the center is to localize the production of goods for the oil and gas industry of Kazakhstan by opening new industrial enterprises and service centers, promoting investment activities.

It is no secret that at the moment we are forced to purchase oil and gas equipment for up to $2 billion annually. The creation of this center will help attract high competencies to Kazakhstan, as well as original manufacturers, which are abundant in the world. Using new technologies, create at least 10 new large production facilities for the production of oil and gas equipment. By signing this agreement, the operators of large projects in the oil and gas sector confirm their interest. They have contractors — well-known world trends — companies that supply equipment. Our task is to dock Kazakhstani business and suppliers of large operators in order to create joint ventures in Kazakhstan for the production of oil and gas equipment. Operators, expressing their interest, open shortlists for the purchase of oil and gas equipment, help to attract personnel for oil and gas engineering from abroad. This center will focus on the brain center for the formation of joint ventures, the attraction of technology and the organization of production in our country.

The center will be funded by operators of oil and gas projects and operate on a non-profit basis.

We hope that the International Center for the Development of Oil and Gas Engineering will start working in the new year and will make its worthy contribution to the development of oil and gas engineering in our country.

— Thank you the interview!

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