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President Kassym-Jomart Tokayev`s State of the Nation Address "Economic course of a Just Kazakhstan"

Dear Compatriots, Distinguished Members of Parliament and Members of the Government,

In accordance with Article 59 of the Constitution of the Republic of Kazakhstan, I declare the second session of the Parliament of the VIII convocation open.

Dear Members of Parliament,

Congratulations to all of you on the opening of this next session, and I wish you success in your responsible endeavors!

After the spring elections, the number of parties in Parliament increased, and the composition of MPs changed significantly. The fractions representing political parties, as well as single-mandate MPs, have actively engaged in work, initiating many relevant bills and raising important issues concerning the country`s development.

Parliamentarians have also been busy during the summer months. In just two months, they visited over 1,200 settlements and met with voters to become acquainted with the situation on the ground. I express my sincere gratitude to everyone for their fruitful efforts. I am confident that the pace of work will increase even further during this new session.

Dear Compatriots,

As many of you know, I deliver my annual State of the Nation Address at the opening session of Parliament. This has evolved into a meaningful tradition.

At this juncture, representatives from all branches of Government convene. We outline key directions for the medium-term, issue specific instructions, and set new objectives. This event breathes new life into the work of Parliament, the Government, and other authorized bodies, playing a pivotal role in the smooth and effective functioning of our state apparatus.

To date, the majority of my initiatives have been implemented, while some are nearing completion. I would like to highlight a few measures that have had a direct impact on the quality of life for our citizens.

For instance, salaries of teachers have doubled since 2020. Medical professionals have also seen significant salary increases, and their incomes now exceed the national average. Citizens have been afforded the opportunity to access part of their pension savings, a move that has positively impacted the well-being of nearly one million people, enabling them to address their housing needs. Within the framework of the "Comfortable School" project, around 400 schools are slated for construction. Additionally, over 300 healthcare facilities are being built in rural areas. The National Fund for Children has been launched, and starting from the new year, funds will be deposited into children`s accounts. Lastly, the state has reclaimed ownership of 8 million hectares of land that was either unused or illegally allocated.

These initiatives represent just a portion of the work already accomplished. There is still much to be done, and we will continue to work diligently.

As you are well aware, the country has been undergoing large-scale political transformations since last year. In just eighteen months, we have made significant changes, and you have been both witnesses and active participants in the implementation of these reforms.

These measures have ensured an optimal balance among the branches of Government. We have transitioned to a model of a presidential republic with a strong Parliament. As a result, the formula "a strong President-a influential Parliament-an accountable Government" has become more deeply entrenched. Our mission now is to put into practice the concept of a listening state, with Parliament playing a pivotal role.

We have also made important strides in human rights protection. A considerable amount of work has been devoted to upholding the rule of law and ensuring justice. Additionally, we have expanded opportunities for citizens to participate in decision-making processes. The political culture within our society has ascended to a qualitatively new level.

However, to become a truly developed nation, it is imperative that we complement political reforms with deep and comprehensive socio-economic transformations.

Despite a complex geopolitical landscape, our country continues to show a positive trend across all key indicators of economic development. Last year, Kazakhstan`s GDP reached 104 trillion tenge, and we attracted a record-breaking $28 billion in foreign direct investment. Our foreign trade turnover hit a record level of $136 billion, with exports accounting for $84 billion. The bedrock of our economic stability-our external reserves-has approached the $100 billion mark.

However, it`s essential to recognize that most countries are also advancing. Today, we are witnessing fundamental shifts in the global economy and the international division of labor. The pace of technological innovation is accelerating, and competition for resources is intensifying globally. Issues such as climate change, food security, and sustainable demographic development have moved to the forefront. In summary, humanity has entered a new era characterized by unprecedented challenges and radical changes.

In this critical juncture, we possess all the opportunities needed for a robust economic leap. To realize this, we must steadily, yet assertively and decisively, transition to a new economic model. Our focus should not merely be on abstract accomplishments, but on the tangible improvement of our citizens` lives.

The guiding principles for the country`s new economic direction will be fairness, inclusiveness, and pragmatism.

The new paradigm for Kazakhstan`s economic development will hinge on the effective exploitation of our competitive advantages and the full realization of the potential of all key production factors-labor, capital, resources, and technologies.

As part of this new economic policy, we will eschew the practice of setting long-term, ephemeral goals. All objectives outlined in this Address should be accomplished within three years; for the most complex tasks, specific deadlines will be set.

Let me now delineate the main contours of the upcoming structural economic reforms.

At this stage, our most crucial task is to establish a robust industrial framework for the country to ensure economic self-sufficiency. Therefore, our primary focus should be on the rapid development of the manufacturing sector.

We must initiate projects that will genuinely transform our nation. The urgency for economic diversification has never been greater. Our attention should be on sectors such as deep metal processing, oil, gas and coal chemistry, heavy machinery, uranium conversion and enrichment, automotive component manufacturing, and fertilizer production. In essence, we need to build clusters that generate high added value.

We must fully leverage the tourism potential of our country. The tourism sector calls for the execution of transformative projects as well. Regrettably, we have yet to see significant achievements in this vital industry, and we trail behind other nations.

Broadly speaking, a specific list of at least 15 major projects is essential. We cannot afford to replicate past errors. Effective support measures and concrete implementation timelines must be identified. Both foreign and domestic businesses should be actively engaged in executing these projects.

It`s crucial to make optimal use of our raw materials, workforce, and products-in short, all elements that constitute domestic value.

With our new industrial policy, we must transition to a qualitatively different development model. The state, in partnership with large enterprises, should close the production cycle within the country. Achieving this will necessitate both regulatory and incentive mechanisms. The manufacturing sector should have access to raw materials in sufficient quantities and at reasonable prices.

Additionally, it is vital to expand the proportion of domestic goods in regulated procurement and fully execute the off-take system. The share of off-take contracts with domestic manufacturers should increase to at least 10%, amounting to an annual two trillion tenge.

Last year, I directed the creation of a fundamentally new public procurement system to address the shortcomings of the existing framework, which include lengthy lead times, frequent appeals, and a lack of transparency. The Government has drafted new legislation aimed at ensuring the rational and accountable use of budgetary resources.

Additionally, this new system should bolster domestic entrepreneurship and, crucially, address urgent issues efficiently through budgetary financing.

Streamlining the procurement process is essential. We must prioritize quality over price, thereby effectively countering dumping practices, and fully automate the procedures. For the first time, full completion construction solutions will be incorporated into public procurement. Transparency should be ensured through a new complaint-handling mechanism and the establishment of public oversight. As a result, the share of Kazakhstan-produced content in regulated procurements should increase to at least 60% within the next three years.

Many countries are now taking active steps to protect their domestic markets. Even in developed countries, there has been a shift toward protectionist industrial policy. In Kazakhstan, however, according to WTO classification, the level of protection for the domestic market is considered low, with only 128 non-tariff measures applied. Therefore, we need new, bold approaches to trade policy.

The state has a duty to protect domestic producers. This is not a signal to close our economy to the outside world; it should remain open, but with the interests of national businesses in mind.

It is well known that Kazakhstan has a well-developed mining industry, which is a reliable source of growth for the national economy. This should continue to be the case. On the world market, prices for most types of metals have reached historic highs. However, there has recently been growing discontent among citizens living near large-scale production facilities. They have been complaining about environmental deterioration and health risks. The number of injuries and deaths among workers is also on the rise. The Government must take decisive measures to improve technological and environmental conditions, as well as worker health and safety. Major industrial enterprises should undergo technological and environmental audits every five years. This requirement should also apply to infrastructure companies.

Geological exploration is an area of particular concern. In 2018, new legislation to manage the mining sector was adopted in order to upgrade the sector. However, it has not been fully effective. As a result, there have been no major geological discoveries in our resource-rich country for a long time. This situation needs urgent change.

We must modernize the management system of the mining sector as soon as possible. In most countries, private companies are the main drivers of the industry. Therefore, attracting large private investments is crucial for unlocking the sector`s potential. This requires a flexible regulatory and fiscal environment. Preferential rights to use the subsoil should be granted to investors who undertake geological exploration at their own expense. The time and procedures for project approvals should be halved by introducing comprehensive state expertise and full digitalization of the process.

The Government`s task is to increase the area of geological and geophysical exploration from the current 1.5 million square kilometers to at least 2.2 million square kilometers by 2026. Developing deposits of rare and rare-earth metals, which have essentially become new oil, should be a priority task. Countries that succeed in this area will set the course for technological progress worldwide.

By the end of this year, we need to develop a comprehensive vision for industrial development. To support manufacturing, foreign and domestic investors should be exempted from taxes and other compulsory payments for the first three years of their investment. This is a fundamental issue that should give a serious boost to the manufacturing industry.

Another important issue is to fully strengthen the defense industry, which plays a key role in ensuring national security in developed countries. The most important task is to create a production cycle with a high degree of localization to reduce dependence on imported supplies. Our army should be equipped with high-tech weapons and military equipment, including armored vehicles, unmanned aerial vehicles, and modern small arms. It is essential to strengthen production capacities for operational repair and support domestic enterprises. We possess the necessary material and technical base, skills, and personnel. These assets need orders from the relevant agencies. Work should continue transferring modern technologies and localizing new production facilities. A special Defense Industry Development Fund will serve as a mechanism for the direct financial support of domestic enterprises.

We face another task: achieving a real breakthrough in the agro-industrial complex. The potential of the domestic agricultural sector is enormous, but we have not yet fully tapped into it. Large markets surround Kazakhstan that require quality food products. Our country`s strategic goal is to become one of the leading agricultural centers on the Eurasian continent. This will only be possible with a gradual transition from primary production to higher value-added products. The aim is to increase the share of processed products in the agro-industrial complex to 70% within three years. To do so, we will need to revise tax policy to stimulate processing.

A qualitative breakthrough in the industry requires a critical mass of large players. In order to retain our own markets and increase exports, we must have enterprises capable of ensuring volume, quality, and regularity of supplies. Therefore, consolidation of domestic agro-firms should be encouraged, along with active engagement of transnational corporations on mutually beneficial terms. Priority should be given to sectors that are promising for us: deep processing of meat, milk, and grain, and the development of industrial greenhouse farming. At the same time, we should not overlook the potential of domestic agricultural enterprises. The example of the North Kazakhstan region, where more than 100 large dairy farms are being built, illustrates this point well. The professionalism of agrarians and the availability of a fodder base, combined with well-designed government support, are yielding good results. This experience should be extended to the construction of poultry farms, vegetable warehouses, and meat cattle breeding enterprises.

Support for small farms is crucial for rural development. The "Auyl Amanaty" program has proven its relevance. The next stage of its development should not only provide soft loans but also stimulate cooperation among private subsidiary farms.

The deterioration of machinery and the tractor fleet has become a serious problem; this indicator currently stands at 80%. Therefore, the renewal rate of agricultural machinery should be increased to 8-10% per year. The interests of domestic machinery manufacturers and agrarians must be considered.

Sales policy is especially important amid growing global competition and the reorientation of commodity flows. The Government faces the task of systematically expanding export geography. Measures should be taken to promote Kazakh goods in foreign markets.

Modern agriculture is a high-tech industry. Land and climate are no longer the determining factors for the success of agrarians; innovative solutions have come to the fore. Without modern science, the industry will not just stagnate but deteriorate. Measures should be taken to develop agro-science, especially its practical application in agriculture. The National Agricultural Research and Education Centre should be transformed into a vertically integrated agro-technological hub.

Scientific and practical cooperation with recognized foreign agro-science centers should be established. Private scientific and technological initiatives will be supported, and educational programs will be adapted to the needs of the agricultural sector.

Serious reforms are needed in plant science. Focus should be on diversifying crops, increasing areas under high-yielding varieties, and reducing water-intensive and monoculture crops. Providing farmers with indigenous seeds and breeding new productive varieties should be prioritized.

It is important to address the issue of excessive price regulation, which seriously hampers the development of the agro-industrial complex. The Food Contract Corporation should play a more active stabilizing role. If necessary, it will intervene to restrain price growth and should support the private market in creating a comprehensive network for the production, storage, and marketing of agricultural products.

Last winter, a series of failures at thermal power stations sharply highlighted the problems of our worn-out infrastructure that have been accumulating for years. Outdated infrastructure directly impacts both the social well-being of citizens and the pace of industrialization. A new economic model cannot be implemented without renovating our infrastructure. The Infrastructure Plan being developed by the Government should identify all problems in this sector and outline ways to rectify them.

Energy security must also be addressed. We should rely as much as possible on our own resources. The key role is assigned to the power generation sector. Over the next five years, at least 14 gigawatts of new energy capacity will be introduced. The reconstruction of the first unit of the Ekibastuz Hydroelectric Power Station-1 will be completed this year. For the first time, the plant will operate all eight units. The project to expand Hydroelectric Power Station-2 is in process, while the project on Hydroelectric Power Station-3 is about to start.

Kazakhstan should not have to import electricity or be dependent on neighboring countries. The current situation is unacceptable from all viewpoints, particularly in terms of state security.

Of course, the implementation of renewable energy projects will continue. Special emphasis should be placed on the development of hydroelectric power plants. Energy, heat, and water supply constitute a single, technologically interconnected system. This system should be treated as an important, separate branch of the economy. The current approach has largely exhausted itself. Today, new solutions are required.

It is necessary to reset the tariff policy, implement new methods of tariff setting, and increase the investment attractiveness of the industry. Adequate market tariffs should be introduced for all natural monopolies for a period of 5-7 years. A guaranteed long-term tariff will allow for better planning of investments and serve as reliable collateral when attracting credit funds.

At the same time, the responsibility of monopolists should be significantly increased. Digital control tools will be introduced, and citizens` access to information on the execution of tariff estimates and investment programs will be expanded. Further gasification of the country is also on the agenda.

Expanding the resource base of marketable gas is a priority task for the Government and the national gas company. It is necessary to accelerate the construction of new gas processing plants and to fully involve existing processing capacities in the circulation. Our oil and gas giants-Tengiz, Kashagan, Karachaganak-must be reliable suppliers of affordable gas. Attracting investment in the exploration and development of new gas fields is also important.

Electricity, heat, and water are basic goods necessary for a comfortable life. These resources should be used responsibly and carefully. This approach should serve as the basis for a new household culture in our country. This notion applies not only to households but also to all participants in economic relations. Wasteful consumption is no longer acceptable.

The Government needs to fundamentally revise the current energy efficiency policy in line with OECD standards. Clear regulatory requirements for energy efficiency and resource conservation should be introduced step-by-step. The goal is to reduce key energy consumption indicators and energy intensity by at least 15% by 2029.

Emphasis should be placed on the development of a green economy. It is clear that in the long-term period, a global transition to clean energy is inevitable. According to international analysts, about a third of global capital investment is already being invested in renewable energy projects. Kazakhstan has also made significant progress in this field, adopting a new Environmental Code and a Strategy for achieving carbon neutrality by 2060. The share of renewable energy in total generation has increased to almost 5% over the last five years. By 2027, another 1.4 gigawatts of capacity will be commissioned. The structure of the country`s energy balance will inevitably change. Therefore, it is necessary to enhance approaches to managing the entire energy industry, from generation to sales.

The development of hydrogen generation is necessary. The expansion of generation facilities serves as the basis for technology transfer and the localization of production in power engineering, as well as the creation of the battery industry. Fortunately, we have abundant raw materials. New solutions are needed in the field of creating balancing capacities and energy storage systems. The transition to carbon neutrality can be accelerated by greenhouse gas emissions trading. The Government and businesses should seize the opportunities in these areas.

Attracting green finance is becoming increasingly important for leading economies. Over the past seven years, more than two and a half trillion dollars have been spent on green bonds worldwide. ESG principles (Environmental, Social, Governance) have become standard practice for financial organizations in a short period of time. In this regard, the Astana International Financial Centre should become the main platform for attracting green funding in our region.

The development of nuclear power is a particularly important economic and political issue. There are different opinions on the feasibility of building a nuclear power plant in our country. On the one hand, Kazakhstan, as the world`s largest uranium producer, should have its own nuclear generation. Some experts support the idea of building plants with small reactors. On the other hand, many citizens and some experts have safety concerns about nuclear power plants. This is understandable, given the tragic legacy of the Semipalatinsk nuclear test site. Public hearings and comprehensive discussions on this issue should continue. In my 2019 election platform, I promised that decisions on the most important strategic issues would be made through referendums. The decision to construct or refrain from building a nuclear power plant is a highly significant issue that greatly impacts the future of our country. Therefore, I propose to submit it to a national referendum. Specific dates will be determined later.

The issue of water availability and quality remains critical. Given the growth of population and the economy by 2040, the water deficit in Kazakhstan may reach 12-15 billion cubic meters. Our country depends on transboundary water resources. Eurasia`s rivers and canals are a shared natural asset designed to unite peoples and economies. We should always seek understanding and a mutually beneficial consensus with our neighbors and friends on this issue. Therefore, conducting a balanced water policy and solving issues of transboundary water use are the most important tasks of the Government.

Farmers and industrialists need qualitative analyses and forecasts on water supply, covering both annual supplies and the medium-term perspective. Therefore, planning in advance is necessary. At the same time, it is crucial to manage inland water resources in a rational manner. The process of introducing water-saving technologies is extremely slow, and there is no culture of responsible water consumption. Losses in agriculture, as a key water consumer, reach up to 40% in some regions. The existing condition of water management facilities exceeds 60% deterioration. Decisive and quick measures are needed to rectify the situation. Firstly, the introduction of advanced water-saving technologies should be accelerated, targeting up to 150,000 hectares per year. It is necessary to address the issue of meltwater accumulation and losses during its transfer, as this represents our internal reserve. For this purpose, we should build 20 new and reconstruct at least 15 existing reservoirs, and modernize and digitize at least 3,500 kilometers of canals. The aim is to provide about two additional cubic kilometers of water by 2027. read more..