State-of-the-Nation Address of the Head of State to the People of Kazakhstan, 2009

«Through Crisis to Renovation and Development»

Dear people of Kazakhstan!

Dear fellow countrymen!

People all over the world are feeling the impact of the economic crisis.

As you know, its tidal waves have reached – and affected – the shores of even the most advanced nations.

We have been able to resist the crises of various scale and scope. As we look back, it was certainly no easy task to build a brand new state for us after the Soviet Union collapsed. Restoring a badly-deteriorated economy, putting it on a new path of development was, in a way, not unlike creating mountains on flat ground. We overcame those difficulties.

Then, at the end of the last century, our independence faced yet another test as the East Asian financial crisis broke out. We were able to withstand that crisis by taking effective and timely measures.

We have been hardened by our experience in difficult periods.

We defined a new direction for the country and kept moving forward steadily.

The current global crisis is a temporary phenomenon. Our people have been coping by remaining calm. Here, we overcome all difficulties by mutual efforts.

The Government is taking measures to help cope with the crisis. The National Fund’s vast financial resources have been put to work to ensure smooth development of the domestic economy.

Social guarantees will be fully preserved. There is no doubt that we will overcome this crisis. Crises come and go. Values, such as independence of the State, interests of the nation and the well-being of the future generations, last forever.

Soon, we will celebrate a great occasion, the 20th anniversary of Kazakhstan’s independence. In terms of global development, two decades is not a long period of time. For us, those two decades equal an era. Our ancestors had dreamed of national independence for centuries.

That is why each year of our independence is very important for our nation. We will make great efforts to ensure our continued independence. Thanks to cooperation of our people there are no peaks and obstacles that we cannot overcome.

Dear fellow citizens of Kazakhstan,

For almost two decades now we have been building, day by day, a new country.

A country that is open and prosperous.

A country where the well-being of Kazakhstanis has been improving from year to year.

A country that is politically stable and has provided security for its citizens.

A country that no one will ever see as a source of external threat.

The development strategy adopted by Kazakhstan for the next few decades, and the experience of translating it into this nation’s real achievements has given us confidence in our own strength and the feeling of certainty that we have chosen the right path.

It is for this reason that, from the outset of the crisis that hit the global financial markets more than two years ago, we developed and have been consistently implementing a comprehensive set of anti-crisis measures.

We have closely watched domestic and external developments, and have taken prompt and decisive measures. This is why the global food crisis has not become a national disaster for us.

However, the current economic crisis that has already affected the entire global economy is still testing our strength. This crisis came to us from without. Its origins are not in this country – they are rooted in the imbalances of the global economy.

The crisis could not have been avoided, nor could have everything been foreseen. The leading economies of the world have already spent more than 10 trillion US dollars, or almost 15 percent of the world’s GDP, to overcome it. But there has been no change for the better so far.

The crisis has successively engulfed the American continent, Europe, and Asia.

In all probability, it is going to be a long crisis. According to analysts, the global economic downturn has yet to bottom out. I expressed my view on the global developments in my article, Keys to the Crisis. It may be somewhat controversial, but we, the Kazakhstanis, have contributed our ideas to the general quest for a way out of this crisis. This is not a simple crisis, and the proposed solutions should be most diverse.

I am convinced that this global crisis will change the international financial system and, maybe, the political ways in which the states are run. There are many of those who feel that the economy needs to be controlled “in the manual mode”, and regulation becomes key to finding a way out of the crisis.

Therefore, a profound and radical approach will help the international community find the ways that will safeguard us against any future zigzags of the global market economy.

This is why the radical measures that I proposed are going to be discussed by the global community.

My proposal is a contribution to the search for solutions to global problems.

But the current reality is that the contracting business activity worldwide has brought down the demand for oil and metals, Kazakhstan’s principal exports.

Within a year, the price of oil and metals dropped by almost three quarters and one half, respectively. Our main trading partners and closest neighbors, Russia and Ukraine, devalued their currencies by 40-45 per cent. We, too, had to let the tenge depreciate in the interests of our producers. Otherwise, Kazakhstan’s products would have lost their competitiveness. We would have continued to burn through the country’s gold and foreign exchange reserves.

Dear citizens of Kazakhstan,

Regrettably, there are more severe trials to come and the pressure of the crisis remains unrelenting. And this is something that you should be aware of.

But you should also rest assured that we are more than just prepared for these trials.

We will overcome them and will emerge from this crisis an even stronger and more prosperous state.

We will preserve our positions in the global community.

Establishing the National Fund was part of our purposeful policy to accumulate savings.

You will remember how much controversy there was about whether or not the fund should be established or whether it would be better to distribute it little by little to everyone. What would we be doing now about paying wages and pensions, with the budget revenue down by 20%?

We did the right thing by establishing the fund in the good times. This is what should be done by states that care about tomorrow.

Thereby, we created a margin of safety, enabling our economy to withstand any potential shocks like this.

In order to create a viable and resilient economy, we consistently implemented difficult structural reforms, built up our export potential and began to diversify.

This is why we have a considerable reserve today, and we are in a position to conduct a sound and effective anti-crisis policy. Most countries have responded to the current global crisis by adopting stimulus packages. Kazakhstan was one of the first nations in the world to promptly respond to the increasing turbulence in the global economy and start implementing proactive measures.

To maintain the stability of the financial system, we provided banks with additional liquidity. That was done to support the economic activities of small, medium, and large enterprises.

The insurance coverage for household deposits was increased from 700 thousand to 5 million tenges. The government helped mitigate the banking sector’s risks associated with external borrowings and capital adequacy. 545 billion tenges was allocated to support housing construction and to deal with the problems of unit holders in real estate investment associations.

To maintain business activity in the country, we provided unprecedented financial support to small and medium enterprises in the amount of 275 billion tenges. Further resolute steps were taken to reduce administrative barriers. A new tax code providing for significantly lower rates of the main taxes was enacted.

The corporate income tax has already been reduced to 20 per cent this year, or by one third compared to last year, and the rate will be 15 per cent in 2011. The VAT rate was lowered to 12 per cent. The regressive scale of the social tax rates was replaced with a flat rate of 11 per cent. Tax benefits are available to enterprises that are making investments.

All of this has provided a most important incentive for the development of the non-commodity sector of the economy, and small and medium business. The law on state procurement offers preferential treatment to domestic producers, which is also designed to support small and medium business.

280 billion tenges was allocated for the development of the agribusiness, and 120 billion tenges was made available for infrastructural projects.

All in all, an additional 2,700 billion tenges was injected in the national economy to counter the crisis. You will agree that this is a powerful stimulus for countering the implications of the global crisis.

We are acting with resolve and quickly because we know what needs to be done – and when it needs to be done – to reduce the impact of the glоbal crisis on our economy and society.

The response was helped by the joint and timely efforts of the country’s Government and Parliament.