Government support of small and medium business in

Government support of small and medium business in Kazakhstan

Kazakhstan’s SME Sector 676 thous. Number of active SMEs (93% of all enterprises) 2 522 thous. $4 663 mln. $46 262 mln. Sectoral structure of SME Lending by banks Production People in 2010 employed (31% of total (18% in total (28% of employment) lending GDP) Regional structure of SME (thous. ) Distinctive features of SME of Kazakhstan ü dynamically developing sector ü institutional scale: more than 93% of all enterprises üSector and regional disproportion Source: Kazakhstan’s Agency of statistics (www. stat. kz), National Bank of Kazakhstan (www. nationalbank. kz) as of 1 January 2011 2

Comparison of conditions of doing business in Kazakhstan and other countries The position of Kazakhstan in World Bank’s «Doing Business 2010» ranking on the ease of doing business* Country Ease of Doing Business Rank Starting a Business Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Singapore 1 4 6 2 4 1 13 USA 5 9 6 5 62 20 8 59 47 72 44 39 181 36 Russia 123 108 89 93 105 162 18 Uzbekistan 150 106 138 132 154 169 44 Kazakhstan ü Kazakhstan is the most improved economy in 2011 ü During 2007 -2011 Kazakhstan improved its position from 80 to 59 place 3

Government support of SMEs Improvement of legislative network GOVERNMENT SUPPORT OF SMES 1. Financial Support 2. Non-Financial Support 3. Stimulation of demand on SME products and services Development of solid infrastructure of financial support Development of solid infrastructure of non-financial support Integration of SME with large business Financing Information-analytical support, Consulting, Training Development of state procurement system Protection of competition, Measures of tariff and nontariff regulation 4. Administrative regulation 5. Fiscal regulation 6. Providing access to physical infrastructure - active role of Damu Fund acts as an operator or agent of programs - advisory role of Damu Fund acts as a member of interagency working groups 4

“Damu” – National Development Institute JSC “Entrepreneurship Development Fund ‘DAMU’”: ü Established in 1997 by the Decree of the Government of RK ü Sole shareholder – national managing company JSC “National Welfare Fund ‘Samruk. Kazyna’” § 16 regional branches one in each oblast (region) and in two cities: Astana and Almaty ü § 270 employees in head office and regional branches Assets – $1 472 mln. Equity – $291 mln. Mission: Assisting qualitative development of SME in Kazakhstan Vision: ü § As of 01 -01 -2011: Damu – national institute, major operator and integrator of entrepreneurship support measures in Kazakhstan Strategic goals: ü ü ü Integration of government measures of entrepreneurship support To provide wide range of financial and nonfinancial instruments to support SME Institutional development of business environment 5

Fund’s programs for 2010 -2020 Financial programs Stabilization program 1 -3 tranches Financial programs under “Business Roadmap 2020” (interest rates subsidizing, guaranteeing) Non-financial programs under “Business Roadmap 2020” (service support, training) Call-center for SMEs Business-portal Damu-Regions 1, 2 Conditional Placement in leasing companies Training Program “Business-Advisor” Institutional development of business infrastructure (business development centers) Institutional development of business infrastructure (guarantee funds, private equity funds) Analytical and information materials for SMEs Targeted programs of financing in regions Cooperation under program «Senior Experts» : - SES (Senior Experten Service) - PUM (Netherlands Senior Experts) Program of business development in small towns TV-projects “Together”, “Business story” 6

Results of SME Financial Support Programs as of 1 January 2011 № 1 2 3 4 5 6 7 8 9 10 11 Program Stabilization program – 1 st tranche Stabilization program – 2 nd tranche Stabilization program – 3 rd tranche Damu-Regions 2 Damu-Ondiris (Manufacturing) Financing of MFOs Program of female entrepreneurship development Program of SME financing in Zhanaozen Financing of leasing operations Targeted programs of financing in regions Total Distribution by banks Amount, mln. $ 580 1 067 1 272 311 22 234 9 8 1 7 5 3 516 SMEs 2 782 2 914 2 911 1 346 52 207 9 337 11 35 12 10 616 Jobs 3 049 4 219 3 847 2 230 520 4829 88 8 944 79 19 813 Distribution by sectors 7

Results of SME Non-Financial Support Programs as of 1 January 2011 Training and consulting ü ü “Business-Adviser” Program Creation of Business Support Centers Call-center Business-portal ü ü 28 000 attendees (209 districts of Kazakhstan) 2 district and 5 regional BDCs created Information support and feedback ü ü Geographic Information System (GIS) Analytical Paper on SME “My Business. Kazakhstan” Magazine SME Round tables and Forums ü ü Site: www. gis. damu. kz 2 issues of analytical book published 13 issues of magazine (monthly) Open-house days of National development institutions in regions ü ü 91 entrepreneurs supported 24 entrepreneurs were featured on TV Support of entrepreneurs with disabilities ü ü “Damu-Komek” Program Television broadcast «Together» üFund started the implementation of non-financial support programs in 2009 üImplementation of non-financial programs revealed a high demand from target audience 8

“Business Roadmap 2020” Program Goal: ü ü Promote growth of regional businesses in the priority sectors of economy Maintain existing and create new permanent jobs Directions of Program: 1. Support of new business initiatives 2. Rehabilitation of business sector 3. Support of exportoriented manufacturing SME Support Instruments: Financial instruments: 1. Interest rate subsidies (up to 7 -9 %) 2. Loan guarantees 3. Deferral of tax payment up to 3 years Current status: ü ü ü 1 st direction: 115 contracts for subsidies, 11 contracts for guaranteeing 2 nd direction: 42 contracts for subsidies 3 rd direction: 24 contracts for subsidies 9

Programs in terms of international cooperation § Raising funds from Asian Development Bank ü Goal: To raise long-term funds for conditional placement in banks for the following lending to SMEs Emphasis: 1. First large loan to Kazakhstan development institute from foreign institution in post-crisis period 2. An alternative to the usage of state budget funds – the realization of loan agreement is strategically important for Damu in the way to self-financing 3. Opportunity to provide SMEs with long-term financing (for modernization and acquisition of new resources) Current status: Terms of loan: üAmount – $500 M üInterest rate – Currency Swap + 0. 3% üTenor – up to 7 years üPurpose of loan – financing of new SME projects ü Backed by the guarantee of Ministry of Finance ü Board of Directors of ADB approved loan provision ü The expected date of loan disbursement (1 st tranche) – 2011 § Business Development Centers (BDCs) SERVICES: ü consulting, service support (outsourcing of services) ü Maintaining databases on suppliers and customers ü Marketing researches ü Training courses, seminars November. December 2010 Creation of regional BDCs: Shymkent, Kyzylorda, Karaganda Planned: September – October 2010 – Creation of regional BDCs: Pavlodar and Ust. Kamenogorsk Finished: July 2010 – Creation of pilot BDCs: Program “Accountant in every village” in Aktobe region Finished: Stages of creation of BDCs in regions: ü Partners: Indian Institute of entrepreneurship development, Korean BDC, USAID, UNIDO 2011 – … Creation of regional BDCs: The rest of the regions of Kazakhstan 10

Thank you for you attention! Head office: 111 Gogol Street, Almaty, 050004 Tel. : +7 (727) 244 55 66, 244 55 77 Tel. /fax: +7 (727) 278 -07 -76 E-mail: info@fund. kz Website: http: //www. damu. kz 11