Interview with First Deputy Minister of Industry and New Technologies Hon Albert Rau
Please introduce us to the role of the Ministry of Industry and New Technologies within Kazakhstan’s mining sector.
AR: “The Ministry of Industry and New Technologies is responsible for all of Kazakhstan’s mineral resources except for oil and gas. There are many facets to the Ministry of Industry and New Technologies’ mandate from technical requirements and standards involved in new investments to trade and export governance.
Subsoil usage very much forms the basis of Kazakhstan’s economy; there is a big government initiative to increase mineral production by 100% over the course of the next five years. Within this context, the Ministry of Industry and New Technologies governs the development and investment into all of Kazakhstan’s Subsoils (excluding oil and gas), as well as the construction and industrial development of the country.
Can you please provide us with a brief overview of the regulatory framework encompassing Kazakhstan’s mining industry?
AR: “Parliament has just recently accepted some changes in Kazakhstan’s Subsoil usage laws. President Nazarbayev is expected to sign this off imminently. These changes make the legal framework for investors into Kazakhstan’s Subsoils clearer. We will provide official documentation to investors with regards to the properties they are prospecting and developing. This change will enable them to achieve financing more efficiently than before.
For the past two years, there has been a moratorium on the issue of new exploration licenses due to speculation in the market place. This is expected to be lifted by President Nazarbayev together with his signing off of parliament’s recent changes to Kazakhstan’s Subsoil usage laws. This change will open up a range of new investment opportunities in Kazakhstan’s vast mineral resource base.”
Why was the moratorium on exploration activity introduced?
AR: “I must confess, we had a lot of work to do in terms of developing an effective regulatory framework that would protect the interests of Kazakhstan as a country, while simultaneously ensuring mining companies and investors found Kazakhstan an attractive proposition to come and do business with. In essence we wanted to develop a model that would remove speculation from the market. Two years ago, we had many companies purchasing and bidding for exploration permits that had no intention of undertaking development of Kazakhstan’s mineral resources. Their objective was to hold property rights they could later sell at a profit; this damages the economic growth potential of Kazakhstan. This area of business activity was a priority for President Nazarbayev to stop, thus the introduction of the moratorium. In a review of existing contracts, around 10% have been stopped for further investigation.”
How important is innovation to Kazakhstan’s mining and industrial sector?
AR: “Innovation and the introduction of new technologies into Kazakhstan’s mining industry is one of the key priorities for our ministry and government. Kazakhstan has vast resources, however, it could achieve more efficient production ratios overall with the implementation of the world’s leading processing technology. Part of our strategy is to attract foreign companies and investors with access to the world’s leading technologies. This will have a net positive effect on Kazakhstan’s mining sector through the positive dispersion of state-of-the-art technology across the industry. From personal experience working on copper projects with British partners, I can confirm this is a very effective means of rapidly developing Kazakhstan’s innovative approach to mining, as well as allowing our industrial base to grow and diversify the economy. President Nazarbayev has just inaugurated the opening of a new aluminum electrolysis factory in Pavlodar; this demonstrates the growing industrial capacity and technological development of Kazakhstan’s mining related industrial base.”
How do you assess the key strengths and points of attraction for investors coming into Kazakhstan’s mining industry?
AR: “Kazakhstan’s greatest strength is our political stability and continuity. Our labor force is highly trained and relatively low cost and our resource base is vast, offering a huge array of opportunities for new entrants into the market. Kazakhstan’s one standout weakness is our status as a landlocked country; this hinders our ability to export bulk minerals such as iron ore at globally competitive prices. President Nazarbayev has suggested a canal link to be developed between the Caspian Sea and Black Sea in order to resolve this challenge; we will see how this develops over time.”
How do you expect the mining industry in Kazakhstan to develop between now and 2020?
AR: “We are presently looking at the period from now until 2014. There are a number of initiatives under way such as President Nazarbayev’s objective to double production and the Ministry’s broad based objectives to increase investment into the sector as well as boosting manufacturing and industrial activity that evolves out of the sector. We are currently working on our strategic plan for the next five years; this will be announced very soon.
Our objective is to ensure industrial and technological development evolves from Kazakhstan’s base mining industry. If we were just to export raw materials, our resource base will one day run out in the future and we would be left with nothing; this would be a huge mistake. Currently, Kazakhstan imports around US$5 billion worth of equipment every year that is used in the mining industry; we want to reduce this figure, while at the same time increasing our industrial capacity and economic diversity.”
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