Report of the Chairman of the Board of Baiterek NMH Aidar Arifkhanov JSC at an expanded meeting of the board of the Ministry of Industry and Infrastructure Development (02/18/2020)

19.02.2020

1

Dear colleagues!

Let me introduce the results of the activities of Baiterek Holding for 2019 and plans for 2020.

 

Key directions and objectives of the Holding

Baiterek Holding was established 7 years ago with the goal of diversifying the economy and attracting investment.

The Holding includes 11 companies in the field of industrial and innovative development, promotion of non-resource exports, development of small and medium enterprises and the implementation of tasks in the housing and construction sector.

The combination of these areas allowed the Holding to become a unique development institution that has no analogues in the world.

         

Key financial indicators

According to the results of activities for 2019 (according to current data), net profit is - 40 billion tenge, with a plan of 38 billion tenge (fact of 2018 - 34.7 billion tenge).

Holding assets amount to 5.3 trillion tenge or 101.8% of the plan (fact of 2017 - 4.4 trillion tenge; 2018 - 4.7 trillion tenge), while the share of loan and investment portfolios in assets for the reporting period amounted to 76 , 1%, with a plan of 75.1% (fact of 2017 - 68.88%; 2018 - 73.16%).

 

Budget utilization

In total, 683.0 billion tenge was allocated from the Republican budget for 2016-2019, of which, according to the results of 2019, according to preliminary data, 565.3 billion tenge or 102.1% of the plan was disbursed.

The development of funds for which the development period has not yet ended will be carried out in accordance with the plan.

 

Big business support

The results of the main strategic directions of the Holding are disclosed below.

The first area is support for large businesses. In the absence of long-term financing in tenge at second-tier banks, DBK is the locomotive of long-term lending to non-resource sectors of the economy - providing every 2nd tenge.

The holding holds almost 50% of the market for long-term lending to non-primary sectors of the economy. DBK's portfolio includes 55 investment projects and 15 export operations worth 6.3 trillion tenge.

 

Support for small and medium-sized businesses

The second strategic direction is SME support.

In 2019, Damu Fund supported 24.2 thousand projects in the amount of 611.4 billion tenge (through mechanisms for the conditional allocation of funds in second-tier banks - 18.9 thousand projects for 238.9 billion tenge, subsidizing interest rates and guaranteeing loans - 5 , 3 thousand projects for 372.5 billion tenge, including for subsidies: SE “DKB-2020” -2 396 projects for loans amounting to 154.4 billion tenge, according to the Mechanism - 171 projects for loans 64, 5 billion tenge, Nurly-Jer - 47 projects in the amount of loans 49.6 billion tenge, UNDP - 27 projects in the amount of loans 1.3 billion tenge. Guarantee on the instrument: SE “D B-2020 "-1 813 projects in the amount of loans 81.3 billion tenge., For the state enterprise" Enbek "- 657 projects in the amount of loans 7.8 billion tenge, Damu-Optima - 203 projects in the amount of loans 13.6 billion tg ..).

As a result, in 2019, in the total volume of loans to SMEs (1,670 billion tenge), the share of the Holding using the tools of the Damu Fund amounted to 36% (594.8 billion tenge).

 

Increase export potential

Export support is the third strategic direction of the Holding.

In 2019, insurance support was provided to exporters in the amount of 97.1 billion tenge, trade financing in the amount of 10.4 billion tenge and pre-export financing in the amount of 11.8 billion tenge were provided.

In March 2019, KazakhExport was capitalized by 34 billion tenge (an increase in the authorized capital is provided for in the Law of the Republic of Kazakhstan "On the Republican Budget for 2019-2021"), as well as on April 3, this year. of the year, the Head of State signed the Law of the Republic of Kazakhstan “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Special Economic and Industrial Zones, Attraction of Investments, Development and Promotion of Export, and Social Security”, which implies the introduction of a state guarantee mechanism for export support. On December 27, 2019, an agreement to guarantee export support in the amount of 102 billion tenge for 10 years was signed between KazakhExport and the Ministry of Finance of the Republic of Kazakhstan.

In addition, KazakhExport opened a network of representatives abroad in the cities. Tashkent, Dushanbe, Novosibirsk, Yekaterinburg and Bishkek. (Also in 2018, KazakhExport appointed representatives in Kazan (Russian Federation), Xi'an (China). These measures will ensure further growth in the volume of non-oil exports.

 

Ensuring financial affordability of housing

The fourth area is ensuring financial affordability of housing. The holding is the main operator of housing construction programs in the Republic of Kazakhstan.

So ZHSSBK takes the first place in long-term tenge deposits of the population in the amount of over 800 billion tenge. By the end of 2019, about 63% of mortgage loans or 527 billion tenge were issued by the ZhSSBK.

Since January 1, 2018, legislative amendments have been introduced to allow military personnel to accumulate in the ZhSSBK at the expense of received housing payments. Over 67 thousand troops will be provided with their own housing. As of 01.01.2020, military personnel opened 98.3 thousand special accounts with a total income of 207.8 billion tenge, 6,592 loans worth 100 billion tenge were issued.

In June 2019, the program “Rental Housing with Foreclosure" was launched for doctors and teachers. As part of the provision of rental housing for doctors and teachers of the CFC, contracts were signed for the purchase of 567 apartments (31.4 thousand square meters). Also, at the expense of KIK's own funds, 84 apartments (5.2 thousand sq.m.) were purchased for employees of the Eurasian Group LLP.

The total fund of rental housing built and acquired by KIK for 2015-2019 amounted to 1.1 million sq.m. (19,234 apartments). During the period of the implementation of the program “Rental housing with the right to purchase” 18.4 thousand families were provided with rental housing.

Baiterek development finances the construction of credit housing through the mechanism of redemption of bonds of MIO according to the "revolving" principle.

In 2019, MIO securities were purchased for 108.8 billion tenge, the plan for 2019 - 101.2 billion tenge.

The Housing Guarantee Fund for 2019 issued guarantees to 23 projects of private developers in the amount of 88.8 billion tenge. The total portfolio of guaranteed projects amounted to 154.8 billion tenge.

In order to reduce the cost of commercial loans, the Damu Fund has subsidized projects of private developers worth 104.1 billion tenge.

 

The program of preferential mortgage lending to large families and low-income families “Bakitti otbasiı

Pursuant to the order of Elbasy at the XVIII Congress of the Nur Otan Party, in order to provide a large family with 4 or more children, families with or raising disabled children, single-parent families with children, a special program called “Funs for Children” was developed, which became part state programs "Nurly Zher" (amendments to the PRM were introduced on April 29, 19).

The plan for 2019 is 50 billion tenge, funds were received by ZHSSBK JSC on July 22, 2019. At the end of 2019, the ZHSSBK accepted 5,196 applications for 51.7 billion tenge, 4,223 loans worth 42.7 billion tenge were issued.

In addition, in accordance with the Address of the Head of State, starting from 2020 - 2023. the annual issuance plan will be at least 10 thousand applications.

  • loan rate - 2% per annum for up to 20 years
  • down payment - from 10% with the possibility of using housing certificates
  • loan amount - up to 15 million tenge in years. Nur-Sultan, Almaty, Shymkent, Atyrau, Aktau, up to 10 million tenge in other regions;
  • acquisition of housing in the primary and secondary markets;

For example, with an apartment cost of 8 million tenge, an initial payment of 10% or 800 thousand tenge, and a loan term of 19 years, the monthly payments will be the first 8 years - 42.1 thousand tenge, the remaining 11 years - 27, 4 thousand tenge.

 

Results of 2019 and plans for 2020

Until the end of 2020, the Holding has the following goals:

  • to carry out financing of large business projects in the amount of 430.9 billion tenge, as well as launch 11 projects worth 573 billion tenge.
  • to support 15.4 thousand SME projects (including 11.983 thousand for conditional placement programs, 3.403 thousand for subsidies and guarantees).
  • provide support to exporters in the amount of 125 billion tenge (the volume of commitments made). In addition, in 2020 it is planned to open representative offices in the cities. Moscow, Urumqi and Minsk.

In 2020, it is planned to introduce amendments to the legislation regarding the introduction of interest rate subsidies, as well as the development of amendments to the legislation / regulatory framework to get out of the regulation of the National Bank of the Republic of Kazakhstan.

  • it is planned in 2020 to provide housing loans in the amount of 420 billion tenge, purchase MIO bonds in the amount of 101.2 billion tenge, guarantee shared construction in the amount of 65.8 billion tenge, and subsidize loans to developers in the amount of 20 billion tenge.

 

Creation of a single operator in the field of housing

According to paragraph 77 of the National Plan of Measures for the Implementation of the Address of the Head of State, the Holding is instructed to take measures to reduce the number of housing program operators.

It is planned to create a Single Operator through the reorganization of Baiterek Development, a Kazakhstan mortgage company, the Housing Guarantee Fund, and transfer to the Single Operator the function of subsidizing loans to private developers of Damu Fund according to the Housing and Development Board model.

The consolidation of assets and reformatting of instruments of the Holding’s housing block will make it possible to raise capital on market conditions, mix with current financial flows and reduce the cost of funding for akimats and private developers, including through subsidization and guarantee mechanisms.

A single operator will comprehensively provide direct support from strategic planning to full support of projects at all stages of implementation, including engineering, digital monitoring and subsequent operation.

Optimization of the housing block of the Holding will increase capital by 120%, assets by 70% and will reduce overall administrative costs by 25-30%.

At the same time, Housing Construction Savings Bank, as the only bank in the country developing a system of housing construction savings, will continue its functions of issuing preferential housing loans to the population.

Thus, the number of existing five operators will be reduced to two - the Holding’s housing block will stimulate the construction of housing through the functions of the Single Operator and will provide demand from working citizens through loans from the ZhSSBK.

In accordance with the resolution of the Head of the Presidential Administration of the Republic of Kazakhstan dated November 29, 2019, it was instructed to ensure the implementation of paragraph 77 of the Action Plan in two stages.

1) At the first stage, before the end of 2019, begin work on the merger of JSC "DB" and JSC "KIK" by making appropriate corporate decisions;

2) At the second stage, by July 1, 2020, to ensure the introduction of relevant legislative changes and the adoption of the necessary corporate decisions on the merger of JSC FGHS into the Single Operator.

In pursuance of the first stage, the Holding Board decided in December 2019 to approve and submit for consideration by the Board of Directors of the Holding for subsequent consideration by the Sole Shareholder of the Holding the issue of merging Baiterek development and the Kazakhstan mortgage company. This issue is planned to be submitted to the Board of Directors and the Sole Shareholder of the Holding in the first quarter of 2020.

 

Key events planned for 2020

  • In accordance with the instructions of the Head of State voiced in the framework of the Address and at an expanded meeting of the Government, as well as taking into account the approval of state programs (SPIID for 2020 - 2025, Nurly Zher for 2020 - 2025, Business Roadmap 2025), this year, an updated Holding Development Strategy will be adopted. The strategy includes the implementation of state programs in five strategic areas: support for large business, SMEs, exports, ensuring financial affordability of housing and the development of equity investment.
  • As it was announced earlier, the Holding will be transformed by creating a Single Operator in the field of housing construction. In addition, plans have been outlined for the development of the Marketplace in the building materials market based on the Single Operator and for the development of the Nurly Zher situational center.
  • Continuation of the implementation of the program “Funds of Obytasy”, “Own Home”, “ерskeri Mortgage”.
  • Currently, the Holding is working on the development of project financing by providing syndicated loans with the participation of the Development Bank of Kazakhstan and second-tier banks. We plan to start financing projects through these tools this year.
  • Continuation of work on expanding the network of representative offices of ESK KazakhExport JSC (it is planned to open representative offices in Moscow, Urumqi, Minsk).
  • Changes will be made to the regulatory legal acts on the withdrawal of KazakhExport ESK JSC from the regulation of the National Bank of the Republic of Kazakhstan.
  • KKM JSC for the first time will become the operator of SPIID-3 in the area of financing projects of the SPIID-3 through the Private Equity tool. In addition, work will continue to finance corporate business through equity instruments with an obligation to repurchase.

Development of a venture financing tool. In previous years, legislative acts on venture financing were amended and QazTechVentures was transformed. In addition, as part of the Head of State’s visit to the United States, an Agreement was signed on the creation of a joint fund with the American Venture Investment Fund (500 Startups). This measure will ensure the attraction of new investments. We expect that in April of this year the first project of the joint fund will be funded. I also note plans for the current year to create a Kazakhstan venture fund.

 

Thus, the implementation of the planned measures for 2020 will allow to successfully fulfill the tasks set by the Head of State and the Government for the Holding, as the main financial operator of state programs for the development of entrepreneurship and ensuring the affordability of housing.

 

Thanks for attention!