How will the manufacturing industry grow and how much will it cost the state?
The manufacturing industry is the key wager in the country’s future economic development because it serves as the foundation for industrialisation. Authorities regularly provide updates on the progressive execution of industrialisation policies aimed at developing a competitive, high-productivity, export-oriented manufacturing sector. By 2030, all programmes and support measures aim to expand production volume, gross added value of the manufacturing industry by 2.8 times, labour productivity to $82.1 thousand, and yearly investment in fixed capital to ₸3.5 trillion. Kanat Sharlapayev, Minister of Industry and Construction, addressed Mazhilis members during government hour how successful this is.
Metallurgy
At the end of 2023, the metallurgical industry had grown by 4.3%. It is anticipated that growth will be sustained by the end of 2024 by means of augmenting the production volume up to 4 million tons (from 3.923 to 4 million tons) of steelmaking enterprises (Qarmet JSC, KSP Steel LLP, Shymkent Temir LLP, Ferrum Vtor LLP, Kazferrostal LLP, Forever Flourishing (Middle Asia) Pty LTD), volume of flat products to 2.6 million tons (from 2.456 to 2.550 million tons), and an increase of cast iron production at Qarmet to 3 million tons (from 2.865 to 2.950 million tons).
Kazzinc LLP (114.2%, 42 to 48 thousand tons), Kazakhmys Corporation (114%, 214 to 244 thousand tons), and the KazMinerals Group (100%, 121 thousand tons) will assure copper growth volumes (from 419 to 452 thousand tons). And by 2029, production volumes are expected to double from 450 thousand to 1 million tons due to the implementation of a new copper smelter project in the Abay region. According to government estimates, implementing this project will allow for the processing of the whole volume of exported copper concentrate.
Kazzinc LLP will deliver more zinc (101%, from 280 to 285 thousand tons) and lead (101%, from 95 to 97 thousand tons), while KEZ JSC will provide a 1% increase in aluminium (from 261 to 265 thousand tons).
Steel production is expected to reach 10 million tons as a result of Qarmet LLP’s expansion and the implementation of new projects for the production of special purpose steel (Kazakhsteel) with a capacity of 1.2 million tons. In addition, ERG and BAOWU Steel plan to launch enhanced processing of iron ore raw materials in the city of Rudny. The manufacture of hot-briquetted iron will provide a 100% raw material base for steel production.
Mechanical engineering
According to official data, the sector’s growth rate in the first quarter of 2024 was 24.9%. By 2025, it is planned to increase household appliance production to 360 thousand units (Silk Road Electronics – 301 thousand units, ALMATY TURMYSTYQ TEHNIKA ZAVODY – 60 thousand units), passenger cars to 160 thousand units (SaryarkaAvtoProm LLP – 110 thousand units, Hyundai Trans Kazakhstan LLP – 50 thousand), and railway engineering goods: passenger rail cars to 100 units (ZIKSTO), locomotives up to 120 units (Elektrovoz Kurastyru Zauyty – 44 units and Lokomotiv Kurastyru Zauyty – 90 units), platforms up to 500 units (ZIKSTO), and open wagons up to 1.5 thousand units (KVK).
A railway cluster should be developed in the city of Ekibastuz, allowing 50% of localization in the production of passenger cars (by 2030). Work is also underway to increase the production of household appliances (given the deficit in the EAEU market of $9 million) by attracting new investors, such as the Chinese company HKC Corporation and the South Korean company Samsung Electronics (investments – ₸12 billion, capacity up to 400 thousand units) on the basis of the current enterprise Silk Road Electronics LLP in the city of Saran.
In the automotive industry, “measures are being taken to gradually transition to a more complex level of vehicle assembly.” The industry has a commitment to increase the share of small component assembly (CKD) to 50% of total output by 2027. They should reach around 20% in 2024, 30% in the next year, and 40% by 2026. At the same time, projects are being worked out to develop an automobile component base in local industrial zones in the cities of Kostanay and Almaty.
A project to construct a multi-brand plant for Chinese car production is underway, and enterprises for the production of plastic parts and vehicle multimedia systems is planned to be commissioned. Beginning January 1, 2026, technical welding and painting activities will be mastered in all Kazakhstan-produced car brands. By 2027, it is planned to produce about 200 thousand units of cars using the small-node assembly method.
Chemical industry and textiles
In the first quarter, Kazakhstan’s chemical industry increased production by 11.4%. By the end of 2024, polypropylene production should reach 440 thousand tons, nitrogen-containing fertilisers 90 thousand tons, and sulfuric acid 400 thousand tons. In the coming years, due to large-scale projects, they promise to increase the level of production of mineral fertilizers by 3.4 million tons, thereby ensuring domestic demand for products.
The government also does not abandon the idea of developing the textile sector. In 2024, the achievement of the IFO in light industry is planned through the implementation of 12 investment projects worth about ₸23.4 billion with the creation of 720 permanent jobs. The key projects identified are: a factory for the production of knitted socks in the city of Shymkent, a plant for the production of non-woven materials in Aktobe, the production of mixed and cotton fabrics in Shymkent. In general, by 2026 it is planned to increase the volume of light industry production to ₸250 billion (in 2023 ₸211.3 billion), exports to $200 million (in 2023 $169 million).
How much does it cost?
The Industrial Development Fund is the industry’s primary financial institution. It is a provider of long-term lease finance for manufacturing industry projects at no more than 9% to the end borrower.
In 2023, according to official data, the operators rendered state incentives’ measures for 544 industrial and innovative manufacturing industry projects, which received government subsidies worth ₸661.5 billion.
The Industrial Development Fund JSC provided leasing financing for 27 projects worth 187 billion, including Astana Motors Manuf. Kaz. LLP for passenger car production (₸52.8 billion), Zerde-Keramika Aktobe for porcelain tile production (₸4 billion) and KamaTyresKZ for car tyre production (₸1.6 billion). Pre-export financing (Development Bank of Kazakhstan JSC) supported 23 projects worth ₸123.4 billion, including Hyundai Trans Kazakhstan LLP for passenger car production (₸15.2 billion), Prommashkomplekt KZ for railway wheel production (₸14.6 billion), and the Ural Transformer Plant for electric motor production (₸7 billion).
Kazakhstan Investment Corporation JSC provided equity and mezzanine financing for 7 projects worth ₸20.04 billion. These projects included Kazakhstan Hot Galvanising Plant LLP for metal processing (₸5 billion), Talas Investment Company for nitrogen-containing compound production (₸4.8 billion) and Alit Holding for dry construction mixtures and solutions (₸3.3 billion).
77 projects received export insurance worth ₸324 billion (ESK KazakhExport JSC), including Qarmet JSC for rolled stock production and rolled metal products (₸39.4 billion), Novozhambyl Phosphorus Plant LLP for fertilisers’ production (₸34.2 billion), and Talas Investment Company for nitrogen-containing compounds production (₸4.8 billion). QazTrade Centre for Trade Policy Development JSC reimbursed costs for 288 projects promoting domestic processed goods to foreign markets, including costs for information and communication services in the amount of ₸6.3 billion. These projects included Kainar-AKB LLP for the production of batteries and accumulators (₸236.8 million), Kazenergokabel JSC for the production of electrical wires and cables (₸35.3 million), Steklo-Service LLP for industrial glass processing (₸34.1 million); and costs for increasing labour productivity for 122 projects in the amount of ₸0.8 billion (QazIndustry Kazakhstan Centre for Industry and Export JSC).
As a systemic measure of government incentives, a method for supplying raw materials to domestic enterprises has been approved, and 25 agreements with significant suppliers to provide primary aluminium and copper raw materials to domestic manufacturers are already being implemented. As a result, in 2023, enterprises processed 51 thousand tons of aluminium, which is 20% more compared to 2022 and 70% more compared to 2021. The plan for 2024 is 72,000 tons.
To encourage development of processing to completed goods, it was decided that the pricing system will be more preferential for manufacturers of completed products (a discount for manufacturers of completed products – 5-8%, for manufacturers of intermediate goods 0.5-2% of the LME). Such a system can be applied to other branches of the manufacturing industry where there is a need for raw materials.
What is the situation now?
In 2023, manufacturing industry output reached ₸21.6 trillion. Compared to prior years, growth is predicted at 4.1%: ₸17.1 trillion in 2021 and ₸20.7 trillion in 2022. At the end of 2023, the mining industry contributed 12.9% of GDP, while manufacturing contributed 12.1%.
The following sectors saw the most growth: woodworking (38%), mechanical engineering (25.4%), light industries (12.2%), and construction industry (6.1%). The volume of investments in fixed assets increased by 11.2% compared to the previous year and amounted to ₸1.7 trillion.
Exports of manufacturing goods in the 12 months of last year amounted to $25.3 billion. In particular, exports increased in the production of clothing by 4 times; in the production of wooden and cork products, except furniture; in the production of straw products and materials for weaving by 2.7 times; in the production of leather and related products by 2.4 times; in the production of machinery and equipment not included in other groupings – in 1.9 times; in the production of rubber and plastic products by 1.7 times.
Source: the-tenge.kz
