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 KAZAKHSTAN International Business Magazine №3, 2013
 Miners and metallurgists in anticipation of changes
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Miners and metallurgists in anticipation of changes

Nikolay Radostovets, Executive Director of the Republican Association of mining and smelting enterprises (AMSE).

Mining and smelting industry, being the basic industry of the national economy, contributes significantly to the development of the domestic industry. So, despite the instability of the global economic situation and weak demand on foreign markets, in 2012 metallurgical enterprises ensured 36.8% of all production of the processing sector of Kazakhstan.

As it is known, mining-and-metals production complex is among priority branches of the state program of forced industrial-innovative development. Today 78 mining-and-metals production complex projects totaling 1.83 trillion KZT are included in the Map of industrialization. 51 of them falls on the metallurgical sector and 27 – on the mining sector.

During the first stage of the programme operation FIIR has already put into operation 42 projects, with the total cost 377,2 billion KZT. For example, at the end of the last year in Stepnogorsk the plant for production of rare earth metals was launched with the designed capacity 1540 tons of carbonates in collective concentrates. This innovative project was implemented by NAC Kazatomprom jointly with Japanese investors.

Another large-scale strategic project for construction of a refinery plant is implemented in Astana. Planned production volume is not less than 25 tons of refined gold and 50 tons of silver per year. The output of the first products of this enterprise is already expected in December this year.

In the next two years the major part of planned industrial objects will be built. So, today there are 36 projects at the implementation stage, the total cost of which is estimated at 1.46 trillion KZT.

In 2013 ше is planned to put into operation a new Ferroalloy Plant JSC TNK Kazkhrom in Aktobe, launch the production of baked anodes in Pavlodar, and also adjust the output of the hoop in Kostanay. A new dressing works with the capacity up to 500 thousand tons of ore per year will be built on the manganese deposit by West Kamys JSC SAT & Company. In the medium-term plans of this company construction of two new ore thermal furnaces that will allow to increase production capacities up to 300 thousand tons of ferrosilicon manganese and extend the line of produced ferroalloys.

For the current year it also planned to initiate the construction of the first act of the Karaganda plant of complex alloys with the annual capacity 75 000 thousand tons. 

On the whole the quantum of output, released by new enterprises introduced in 2010–2012 has already exceeded 370 billion KZT, which corresponds to the contribution to the growth of production in mining-and-metals production complex at the 12.1% level. As a result, production of metal ores in Kazakhstan increased by 7.7%, and the output of metallurgy increased by 13.9%.

Metallurgical enterprises in recent years have managed to expand their product line. A course for the development of the industry will allow adjusting the production of 106 previously not produced in the Republic kinds of mining-and-metals production complex products. Domestic goods, like raw materials, are in steady demand on world markets, because the quality mining-and-metals production complex products of of Kazakhstan is evaluated quite high abroad.

The prospect of forming a Eurasian Union and accession of Kazakhstan to the World Trade Organization will open up new opportunities for the mining and metallurgical industry and will contribute to further expansion of the market.

Today the main flow of goods and raw materials move from Kazakhstan to Russia and the CIS States, and to a lesser extent – to Europe, China and other nations. Leading positions in Kazakhstan supplies abroad and it is 55.4% mineral products, 26.5% falls in metals and products made of them. Interestingly, the structure of export is gradually changing: trade of raw materials slowly, but steadily decreases, while the proportion of more high-tech products (semi-finished products) to the contrary grows. A slight drop in 2012 of domestic export indices in contrast to import is explained by a general decrease of demand for mineral resources and mining-and-metals production complex products.

With regard to investments to the industry, the main volume of funds is directed to the development of mining and production of non-ferrous and noble metals. So, for the period from 2005 to 2012 the total amount of investments in the mining-and-metals production complex was 2026 billion KZT. Out of them 788 billion KZT falls on investment related to the production of ores of non-ferrous metals, 197 billion KZT on iron ore extraction, 362 billion KZT – for the production of ferrous metals and 679 billion KZT – non-ferrous and noble metals.

Most of the revenue, about 72.4%, is ensured at the expense of own funds of enterprises. Foreign investments accounted for 13.5% of all investments, loan financing – 14.07%, and funds of the Republican budget – 0.01%.

There is no limit to perfection

I should point out that today the industry is in need of taking systemic measures, aimed at ensuring its further sustainable development. There are a number of factors, which decrease efficiency of mining-and-metals production complex operation.

First of all, these include the legislative base. The existing law “On subsoil and subsoil use”, which regulates the activity of the mining sector, does not take into account all the features of extraction of solid minerals. This document was published only two years ago, but law enforcement practice has already revealed in it a lot of legislative gaps.

In particular, due to non-specific regulation of issues, associated with the criteria of labelling deposits as strategic ones, investors bear high risks, and this moment is negatively perceived by the business community. Today large investors, starting to explore subsoil in Kazakhstan, say about the need in a detailed elaboration of the procedure of establishing relationships between the state and the subsoil user at all stages: from exploration, construction of the mine and dressing works, to production of products and sale of it for export. Except for this, there are certain problems with obtaining geological information, as part of the data remains in secret. Total inconsistency of regulatory legal and legislative acts in the sphere of subsoil worsens the situation.

In that regard, AGMP and Kazakhstan association of organizations of oil and gas and energy complex "KAZENERGY" agreed on the joint development of a draft Code of subsoil. Supposedly this document will regulate mining and oil-producing industries, as well as specific industry related sectors that will allow to improve their investment attractiveness.

Another sore point is ensuring of a transport infrastructure. For the past several years mining and metallurgical companies are experiencing difficulties with transporting their products in an export direction due to a lack of a rolling stock. Moreover, Kazakhstan witnesses annual growth of rates (at the level of 15%) for rail transport.

With regard to environmental aspects of mining-and-metals production complex activity, I must say that with the introduction in 2013 of the national system of trading by quotas for greenhouse gases, the industrial sector simultaneously with the toughening of environmental liabilities appeared to be in the area of financial risks. Under the new rules on environmental law penalties for exceeding the permitted limit of emissions today are 10 MCI (monthly calculation index) per ton. This environmental policy may not only adversely affect the economy of most mining-and-metals production complex enterprises, but also seriously restrain the development of the industry.

In light of the above mentioned, our association together with enterprises of the sector actively works on the improvement of legislative regulations. We provided essentially important amendments to the law “On subsoil and subsoil use” to the Ministry of industry and new technologies, as well as the Ministry of oil and gas. Negotiations on removal of tension in issues of environmental and tax payments are also held with representatives of the nature conservation agency.

In our view, today there is a need to formulate a clear state policy regarding mining-and-metals production complex, as well as to reform public administration in this sphere. Creation of consultation-advisory bodies for the development of industry under the Government and the President of the Republic of Kazakhstan could promote solving these tasks. As never before the question of developing and adopting a long-term Strategy for the development of the mining and metallurgical industry is relevant. Reformatting of the approaches of the sector management will become the security of positive changes in the domestic industry. We need to create clear and predictable conditions of work for subsoil users. It concerns issues of stability of taxation, environmental requirements, personnel training for mining-and-metals production complex, as well as the state plans for development of infrastructure and increase of Kazakhstan content. Together with Atameken NEPK our association has already presented its vision of reforming the industry, which gained a positive assessment of the Ministry of industry and trade.

I will mention that in order to implement an efficient sectoral policy in mining-and-metals production complex, a positive experience, accumulated by the domestic oil and gas complex, can be used. Here its own industrial development program acts; there are the National Council, the Inter-departmental Commission under the Government, as well as the sectoral Ministry, which coordinates state assets and relevant policy.

The primary resource is people

The principles of social partnership development in mining-and-metals production complex are traditionally strong. In our sector more than 190 thousand people are working, and the relationship between employees, sectoral trade union and employers has long ago been solidly established. Tripartism model in the mining-and-metals production complex was approved by the Ministry of labour and social protection of the population, as well as recommended for use in other branches of Kazakhstan economy.

The basis of social partnership in mining-and-metals production complex is the General agreement between the Government, republican association of employees and republican association of employers, as well as the Sectoral agreement between MINT, AGMP and trade unions in 2011–2013. All this is aimed at creating an efficient mechanism of regulating social, labour and related to them economic relations. Trilateral agreement regulates the employer's obligations on ensuring an efficent sustainable operation of the enterprise, increasing productivity and improving the system of payment, maintenance of safe working conditions, health improvement of employees, development of their education and professional training.

At the February meeting of the Republican trilateral commission on social partnership and the regulation of social and labour relations, the parties have agreed to conduct joint consultations on the creation of a favorable environment in collectives and the improvement of the labour remuneration system. Today various models of labour remuneration exist on enterprises of the industry, due to which disproportion in salaries arises. (Although, for example, the average salary in the coal industry is virtually the same in all extractive companies). Therefore employers jointly with trade unions and involved experts conduct an analytical work, considering various options of removing the existing disproportions. Final results of this activity will be given in late May – early June this year.

At the IV Convention of the mining and metallurgical industry the sectoral trade union will voice a number of proposals on improving the labour remuneration system of workers of the industry, encouraging the personnel for retraining, increase attractiveness of professions of a miner and metallurgist. Besides, it is planned to submit a draft of a sectoral trilateral agreement for 2014–2016.

Implementation of the proposed measures, together with the improvement of methods for determining the cost of living and the existing increasing sectoral coefficient, will allow to approach the average salary by the industry to a cherished line, called "a worthy level". And a large provision of information of the employees of the industry about actions taken by employers and trade unions will be the guarantee of social stability in labour collectives.

Personnel for the industry

As it is known, Kazakhstan continues to upgrade technical and occupational education. Owing to the interaction of the state and business in this sphere, improvements have been outlined. Employers willingly engaged in the process of reforming TVE system, as they are consumers themselves of the personnel market. As the head of the state noted in the Strategy "Kazakhstan-2050", the success of a new economic policy "should be supported by the personnel”.

Beginning the last year, on the basis of our association the Sectoral Council for AGMP on personnel for the mining and metallurgical industry (SSK mining-and-metals production complex) is operating. Within the last two years there is work on the formation of an independent assessment system and qualification confirmation (IAQ). And there are already certain results. We have created a list of 15 most requested mining-metallurgical specialties and developed qualifications requirements for them. Apart from this, MINT jointly with AGMP prepared a draft of Regulations compliance confirmation and award of qualifications of specialists in the mining-and-metals production complex. The system of independent assessment and awarding qualifications will be launched in a pilot mode in three regions of the country – in Aktyubinsk oblast based on Khromtau mining-technical college (mineral processing), in the Karaganda oblast in Balkhash based on the Polytechnical college of corporations "Kazakhmys" (non-ferrous metallurgy), as well as in East-Kazakhstan oblast based on Rider agro-technical college (underground mining).

It is generally recognized that the majority of employees of mining companies are graduates of professional technical schools. Today there is a challenge to introduce progressive world experience on enterprises. With the current pace of international globalization and integration of Kazakhstan into the UES (Uniform Economic Space) competition will increase not only in the sphere of goods and services, but also in the human resources sphere. And an independent assessment will allow to raise the quality of practical training of specialists and align the level of training up to requirements of professional standards.

The Republican association of mining and metallurgical enterprises is created in 2005 upon the initiative of enterprises of the mining sector under the support of the sectoral ministry. AGMP represents the mining and metallurgical industry in the National economic chamber Atameken Union.

The association is the largest sectoral union of Kazakhstan, composed of more than 90 companies of ferrous and non-ferrous metallurgy, uranium and coal industry. Among them there are enterprises of the group ENRC Kazakhstan, ArcelorMittal Temirtau JSC, Kazakhmys Inc. LLP, Ust-Kamenogorsk titanium magnesium plant JSC, NC Kazatomprom JSC, KSP Steel LLP and others. 

AGMP is a part of the Republican trilateral commission on social partnership and regulation of social and labour relations. As a signatory of the General agreement, it concludes a Sectoral agreement, which determines common principles of regulation of social and economic and labor relations on the enterprises of the industry.

In accordance with the Law "On private entrepreneurship" AGMP is accredited in 13 ministries and departments, and its representatives are actively involved in working groups of the Government and Parliament in drafting of normative legal acts.

 
 
 


Table of contents
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3





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