Kazakhstan’s Ministry of Trade admits its fault in lack of support to exporters

Minister of Trade and Integration Serik Zhumangarin has admitted that his ministry has failed in providing local exporters with official support. The minister made this statement in response to a question by MP Nikolay Arsyutin.

In his request, Arsyutin mentioned $1.3 million that was supposed to be used as subsidies to cover banking interest associated with loans issued to those foreign companies that buy products from Kazakhstan. This money should have also been used to subsidize leasing payments from foreign clients for Kazakhstani leasing companies.

As the MP noted, this money never reached their recipients, which the cabinet itself confirmed.

«There was no state support for exporters, which is your ministry’s fault. Because of this we probably lost some foreign markets. The only justification for why these financial resources remained untapped is the absence of rules for interest subsidizing,» Arsyutin said.

He also asked if Zhumangarin would admit that his ministry is responsible for the absence of necessary rules for subsidizing loans issued to foreign importers.

In turn, the minister said that a law on the industrial policy adopted in 2021 regulates almost all aspects of state support to foreign importers via subsidizing interest rates for loans issued by Kazakhstani banks. According to the law, a special financial agent must be responsible for such subsidizing. As Zhumangarin said, the ministry thought that KazakhExport, a public organization responsible for export risk insurance, must be considered such an agent. In addition, the law requires that public support is given only to those foreign importers who acquire high-end goods and services from the processing industry.

«During this process, the Agency for Regulation and Development of the Financial Market refused to assign KazakhExport as a single operator for subsidizing as at the time the company had no right to be involved in any activity beyond insurance. As a result, the ministry suggested that Damu Development Fund be responsible for interest rate subsidizing,» Zhumangarin said.

DAMU has given its consent and the Ministry of Industry made some adjustments in its rules for high-end products. Moreover, the agency has developed rules for interest rate subsidizing.

«Currently we have such rules. However, we can’t apply them without a law on export insurance agents, which is under consideration by the parliament. I know that the first reading of the draft law is going to take place at the end of June. Therefore, I hope that this document will be approved by the end of this year,» the minister highlighted.

According to Zhumangarin, the key reason the interest rate subsidizing mechanism still doesn’t work is poor planning and forecasting. For example, law drafters used real export contracts including contracts on locomotive supply to Tajikistan, Azerbaijan and Kyrgyzstan and a contract on helicopter maintenance with Kyrgyzstan, although none of these contracts have been delivered so far.

«The main reason why allocated resources have remained untapped is the absence of foreign partners that would cooperate with Kazakhstani exporters at the time. We are working on this. We’ve already decreased the amount of money allocated in the state budget for this purpose, and I hope we will use this money. However, I admit that this is the ministry’s fault anyway,» the minister said.