Ensuring sustainable economic growth and quality of life for the population is a key objective set out in the Address of the Head of State to the people of Kazakhstan in October and during the recent enlarged meeting of the Government of the Republic of Kazakhstan.
Chairman of the Management Board of the "Baiterek" Holding Aydar ARIFKHANOV told about the contribution of JSC National Managing Holding "Baiterek" to the achievement of the country's strategic objectives, the results of work in 2018 and plans for the near future.
Unique development institute
– Aidar Abdrazakhovich, what is the role of "Baiterek" Holding in the socio-economic development of the country today?
– The holding was established six years ago by order of the Head of State Nursultan A. Nazarbayev to ensure the diversification of the economy and attract investment. Today, the company includes 11 subsidiaries in the field of industrial and innovative development, promotion of exports of national products, development of small and medium businesses and implementation of tasks in the housing and construction sector. The merger of these areas made it possible for the Holding to become a unique development institution that has no analogues in the world. Each of these directions has a set of tools, which comprehensively provide business and population with opportunities to develop entrepreneurship and ensure financial affordability of housing
Support for large businesses is provided through debt, equity and leasing financing, and for small and medium-sized businesses through conditional financing through second-tier banks and microfinance institutions, interest rate subsidies on loans, and loan guarantees.
Export insurance and export financing are provided to exporters to enhance export capacity.
In order to ensure the financial affordability of housing, preferential housing loans, rental housing, guarantees of equity deposits and funding of local executive bodies through the mechanism of redemption of their bonds are provided.
– In 2018, the growth of the domestic industry exceeded 4%. What work is being done by the Holding in terms of investment in industrial projects?
– The Development Bank of Kazakhstan is the key development institution for financing large strategic projects in the manufacturing industry. DBK has become the driving force for long-term lending to the non-raw material sectors of the economy, providing every second tenge in this market
The holding occupies 48% of the market of long-term crediting of non-resource sectors of economy. The DBK portfolio includes 63 investment projects and export operations worth KZT5.3 trillion. In 2018, six projects worth 173.5 billion tenge were put into operation. These include the construction of the Makinskaya poultry farm in Akmola region, a transport and logistics centre and new capacities of the mineral water and beverage bottling plant in Shymkent, the creation of a complex for the production of railway wheels in Pavlodar region, the launch of the production of ecoclass K5 motor fuels in West Kazakhstan region, and the modernization of the mineral fertiliser plant in Mangistau region. In addition to the obvious production and economic benefits, these six projects have created more than 1,500 new jobs.
In addition, last year DBK approved six more investment projects and three export operations for 225 billion tenge, financed 17 investment projects for 329.9 billion tenge and provided pre-export financing for 13 projects for 113.3 billion tenge. The investment projects include modernization of the Shymkent oil refinery, gas distribution networks of the Turkestan region and Taraz, gasification of a number of settlements of the Kyzylorda region, reconstruction of the passenger terminal at the airport of Astana, construction of the Turgusun hydroelectric power station in the East Kazakhstan region and wind power station in Astana.
Also this year it is planned to launch 16 projects of medium and large businesses for 735.2 billion tenge, including the development of an oil engineering plant and the construction of a complex of deep oil refining in the Atyrau region, the establishment of ferrosilicon production plants in the Karaganda region and other projects.
Business support, housing construction
– The state has been tasked to increase the share of small and medium-sized businesses in the country's economy to 35% by 2025. What concrete measures are being taken by the Holding to support this sector?
– The subsidiary of "Baiterek" Holding, the "Damu" Entrepreneurship Development Fund, is the main operator of SME development programmes. Today, it focuses on supporting micro and small enterprises. To this end, the Fund provides start-ups and existing businesses with three instruments of support - conditional placement of funds in second-tier banks, interest rate subsidies and loan guarantees. As part of these instruments, 21,000 projects worth over 487.1 billion tenge were supported in 2018. As a result, the Holding's share in the total volume of loans to small and medium-sized businesses exceeded 27%.
Special mention should be made of the implementation of the state programme "Business Road Map", in which the "Damu" Fund acts as a financial agent. Since the beginning of this program, 214.7 billion tenge has been allocated to subsidize the interest rate on loans and 13.8 billion tenge to guarantee loans. To date, these funds have allowed to subsidize about 12.8 thousand projects worth 2.54 trillion tenge and provide guarantees for 4.8 thousand projects worth 179 billion tenge. In 2019, it is planned to support 14.6 thousand projects of small and medium businesses.
In addition, through microfinance organizations, the Damu Fund will continue to support micro and small businesses through apex mechanisms, as well as automate business processes to raise and invest funds and subsidize loans up to 180 million tenge.
It is also important to note that in order to implement the order of the Head of State to ensure long-term tenge liquidity, at the expense of the National Bank of the Republic of Kazakhstan and the funds under its management, will be allocated 600 billion tenge to second-tier banks. In turn, in order to reduce the debt burden on entrepreneurs, the Damu Fund will subsidize the interest rate within the framework of the existing programs of the "Business Road Map".
– "Baiterek" Holding is the main operator of housing construction programs. It is safe to say that affordable housing is one of the cornerstones of the state's social policy. What results in this sphere should be paid special attention to?
– The development and support of the construction market, as well as the creation of affordable housing are the focus of efforts of several portfolio companies of the Holding.
Firstly, the stimulation of demand in the housing market is provided by "House Construction Savings Bank of Kazakhstan" JSC by issuing preferential housing loans and conditional financing of second-tier banks. Today, House Construction Savings Bank of Kazakhstan takes the first place on long-term deposits with savings of depositors at the level of 624.2 billion tenge, which is 29% of the total long-term deposits of second-tier banks in the country. At the end of 11 months of 2018, 63% of mortgage loans, or KZT 360 billion, were issued by House Construction Savings Bank of Kazakhstan.
In addition, in order to further stimulate the system, the House Construction Savings Bank of Kazakhstan business process requirements were optimized and reduced, which allowed the number of daily contracts to be increased by 2.5 times - from 1,000 to 2,500 deposits. These measures allowed the Bank to ensure annual growth of new depositors by 35%.
Also, from January 1, 2018, amendments to the legislation came into force, allowing military personnel to make savings in the House Construction Savings Bank of Kazakhstan at the expense of received housing payments. Over 67,000 servicemen will be provided with their own housing, with budget savings of 824 billion tenge over 25 years. To date, servicemen have already submitted 2,387 applications for preferential mortgages worth 36.1 billion tenge.
Second, the Kazakhstan Mortgage Company also stimulates demand in the housing market by buying out mortgage loans from commercial banks and providing rental housing with the right to buy. In 2018, Kazakhstan Mortgage Company purchased mortgage loan claims from second-tier banks and purchased mortgage bonds for KZT14.9 billion, refinanced housing mortgage loans for KZT731 million. The volume of subsidized housing mortgage loans under the "Nurly zher" program amounted to 36.2 billion tenge.
In general, last year the CEC commissioned 97.3 thousand square meters of rental housing - 1,734 apartments. The total fund of rented housing built or purchased by the Kazakhstan Mortgage Company is 1,8583 apartments. During the period of implementation of the "Rental housing with the right to buy" direction within the framework of the program "Nurly zher" 17.2 thousand families were provided with rental housing.
Thirdly, "Baiterek Development" JSC provides stimulation of supply in the housing market through financing of construction. Since 2017, the company has been an operator in financing the construction of credit housing for local executive bodies through the mechanism of buying back its bonds. All financial resources, as well as functions related to project selection, identification of developers, development and monitoring of the construction process were transferred to the akimats. This allows the Company to process funds on a "revolving" basis every two years without contact with developers and to redirect them to new construction without additional allocation of resources. Thus, in 2018, securities of local executive bodies worth 98 billion tenge were purchased, this year this amount is planned to be at the level of 108.8 billion tenge.
Fourth, the Housing Construction Guarantee Fund provides incentives to stimulate supply in the housing market by guaranteeing shared deposits and mortgage loans from second-tier banks. The Fund provides guarantees to shareholders on completion of construction of residential building in case of default of the developer on construction of residential facility. For this purpose, a reserve has been formed at the expense of the guarantee contributions, the purpose of which is exclusively to cover the costs associated with the settlement of the guarantee case. In 2018, the Fund issued guarantees to 16 projects of private developers for the amount of 56.4 billion tenge.
From export tools to digital technology
– The Ministry of Industry and Infrastructure Development recently announced the expansion of the geography of Kazakhstan's exports to 119 countries. What tools does Baiterek Holding use to support domestic exporters?
– Yes, export support is one of the main strategic directions of the Holding Company. Since March 2017, the export insurance company "KazakhExport" has received the status of a national company, becoming a single center of financial support for exports with a wide range of financial instruments.
In 2016-2017, KazakhExport capitalised a total of KZT27.9 billion. As a result, in 2018, insurance support was provided to exporters in the amount of 90.2 billion tenge, trade financing in the amount of 10.26 billion tenge and pre-export financing in the amount of 6.91 billion tenge.
KazakhExport will capitalise on another 34 billion tenge in 2019 to ensure further growth in non-oil exports. In addition, a mechanism of state guarantees for export support will be introduced, similar to the specialized international export agencies; it is planned to amend the Entrepreneurial Code of the Republic of Kazakhstan in terms of subsidizing interest rates on financing export transactions by funding second-tier banks and financial institutions, as well as expanding the network of representative offices abroad.
This year it is also planned to provide comprehensive support to exporters on insurance and reinsurance for 95 billion tenge, on export trade and pre-export financing - for 19 billion tenge. In total, in the next three years, the Holding plans to support exporters in the amount of 300 billion tenge.
– Another trend of modern development is digitalization. The state program "Digital Kazakhstan" is being implemented in the country, various events are being held, including the recent forum in Almaty with the participation of the heads of government of the EAEU, where "Baiterek" Holding was also represented.
– Indeed, the Holding is actively working on the digitalization of its activities and the provision of services through the introduction of a single customer window. The key document in this direction is the Holding Company's Digitalization Strategy for 2018-2023, which provides for 20 digital steps. Twelve of them have already been implemented, including the development of the "Digital Baiterek" Unified Digital Site, corporate website and treasury operations management system; automation of personnel policy, implementation of the Electronic Contracts service, organization of the Unified Contact Center, piloting of blockchain technologies, etc..
To date, out of all the services provided by the Holding, 30 are automated, 28 of which are placed on the "Digital Baiterek" platform and two - on the e-government portal "eGov". Currently, work is underway to place additional ten services on the portal "eGov" to support small and medium-sized businesses.
Today, the Holding's clients can apply for investment activities and export assistance, receive financing and guarantees for housing construction, purchase housing within the framework of the program "Nurly zher" and sale of apartments in the EXPO territory, receive innovative grants and support for large, small and medium businesses through the portal.
At the same time, in 2018, within the framework of the state program "Digital Kazakhstan", work was carried out to implement integration mechanisms with the web portal of the National Chamber of Entrepreneurs "Atameken". In the first quarter of 2019, it is planned to implement the "Electronic Reception" service with the possibility of individuals and legal entities using the Internet.
– As a continuation of the technological theme - what work is being done by the Holding in the development of the innovation ecosystem?
– The Holding carries out this work through its subsidiary, the National Agency for Technological Development. NATD is currently undergoing a transformation that will focus on two main support tools.
Firstly, in 2018, a tool of grant support for accelerators and business incubators was introduced in order to develop technological entrepreneurship. During this period, three business incubators were supported - BeInTech, SmArt Point Almaty and MOST. In the future, this program will include regional participants as well.
Secondly, to further finance the growth of these companies and the development of NATD will work in the form of a fund of funds and plans to create venture funds from 2019. In 2018, the Holding initiated the adoption of amendments to the draft law on venture financing. In November, as part of the visit of the Prime Minister of the Republic of Kazakhstan Bakytzhan Abdirovich Sagintayev to Singapore, two memoranda on the establishment of joint Kazakhstan-Singapore venture funds were signed.
These tools will allow both to support the development of high-tech companies at an early stage of development, and seed investments with further growth and bringing these companies to a more developed level with products and services with high added value. To date, the legal and organizational measures necessary for the full implementation and implementation of these support tools are being carried out.
In general, summing up the results of 2018, it can be noted that the Holding Company effectively implements all the tasks it faces and continues its development in accordance with strategic and operational plans.
