On signing an Additional Agreement to the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program dated July 1, 2013

Home / Government Decrees / On signing an Additional Agreement to the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program dated July 1, 2013

On signing an Additional Agreement to the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program dated July 1, 2013

Resolution of the Government of the Republic of Kazakhstan dated June 4, 2026 No. 466.

THE Government of the Republic of Kazakhstan DECIDES:

1. To approve the attached draft Supplementary Agreement to the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program dated July 1, 2013.

2. Authorize Asan Kobentaevich Darbaev, Vice Minister of National Economy of the Republic of Kazakhstan, to sign on behalf of the Government of the Republic of Kazakhstan an Additional Agreement to the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program dated July 1, 2013, authorizing make changes and additions that are not of a fundamental nature.

3. This resolution shall enter into force from the date of its signing.

The Prime Minister of the Republic of Kazakhstan

O. Bektenov

Approved by Resolution No. 466 of the Government of the Republic of Kazakhstan on June 4, 2026

Project

Supplementary Agreement to the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program dated July 1, 2013

This Supplementary Agreement (hereinafter referred to as the Supplementary Agreement) is concluded between the Government of the Republic of Kazakhstan (hereinafter referred to as the Government) and the European Bank for Reconstruction and Development (hereinafter referred to as the EBRD or the Bank), individually referred to as the "Party" and collectively referred to as the "Parties", on the technical cooperation account of the Government of the Republic of Kazakhstan and the EBRD in relation to the Technical Cooperation Program (hereinafter referred to as the Invoice).

Because:

(A) On July 1, 2013, the Parties concluded a Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Technical Cooperation Program, which was amended by additional agreements between the Parties dated April 25, 2015 and December 12, 2016 and additions, and in accordance with which the Account was replenished (hereinafter referred to as the Agreement);

(B) The Parties intend to continue cooperation on the successful attraction and implementation of technical cooperation and other advisory support in accordance with the Agreement, which has raised 2,335,000 (twenty-three million three hundred and fifty thousand) euros from the Account's funds to date, and to this end, the Parties intend to amend certain provisions of the Agreement regarding the use of the Account's resources, At the same time, the Government intends to provide additional means of cooperation by replenishing the Account.;

(C) The Parties have expressed a desire to amend certain provisions of the Agreement and agree to replenish the Account with additional means of cooperation provided by the Government, in the amount and on the terms set out below in this Supplementary Agreement.,

In this regard, the Parties hereby agree on the following:

Article 1. Amendments and additions to the Agreement

To make the following amendments to the Agreement, which are subject to entry into force from the date of signing the Supplementary Agreement:

1.1. Article 5.1 (Use of Account resources) should be worded as follows:

"5.1. The Account's resources may be used by the EBRD to finance technical cooperation activities (collectively referred to as "Assignments" and individually as "Assignments"), namely:

(i) technical assistance activities, including, but not limited to, institutional support, training and/or advisory services, managed or supervised by the EBRD;

(ii) Technical assistance in the form of consultations within the framework of the political dialogue;

(iii) technical assistance for the implementation of programmes, projects or activities in accordance with the Agreement, to the extent that they are consistent with the objectives and functions of the EBRD; and

(iv) such other arrangements as may be agreed in writing from time to time between the Parties, provided that such arrangements are consistent with this Agreement and the objectives and functions of the EBRD."

1.2. Annex 1 (Technical Cooperation Program of the Government of the Republic of Kazakhstan and the EBRD) should be amended in accordance with Annex 1 (Technical Cooperation Program of the Government of the Republic of Kazakhstan and the EBRD) to this Supplementary Agreement.

Article 2. Account replenishment

2.1. The Government provides, free of charge, with the exception of the cases provided for in Article 20.2 of the Agreement, funds in the amount of 6000000 (six million) euros as a replenishment of the Account in accordance with Article 3.2 of the Agreement in order to finance the fulfillment of Program Tasks within the Account ("Replenishment").

2.2. The replenishment is distributed as follows:

(i) up to 2,000,000 (two million) euros of Replenishment are allocated for the purpose of financing the performance of Tasks under the Partnership Agreement as amended; and

(ii) up to 4000000 (four million) euros of Replenishment are allocated to finance technical assistance within the framework of the political dialogue.

2.3. Replenishment is provided by the Government of the EBRD in cash in three parts to the bank account specified by the EBRD in the payment request, in accordance with the following schedule:

(i) 2000000 (two million) euros no later than December 31, 2027;

(ii) 2,000,000 (two million) euros no later than December 31, 2028; and

(iii) 2000000 (two million) euros no later than December 31, 2029.

2.4. In accordance with Article 10 of the Agreement (Administrative Fee) and the Bank's Rules regarding Fees for the provision of Donor Funds, the Bank has the right to deduct and withhold an administrative fee in the amount of 5% of the Replenishment amount to cover the costs of managing and administering the Account. Such an administrative fee is deducted by the Bank from the Deposit when it is credited to the Account.

2.5. The Parties hereby agree that Replenishment is subject to the provisions of Articles 16.1 to 16.4 (Reporting Requirements) Agreements.

2.6. In accordance with Article 16.5 of the Agreement, the EBRD will provide the Government with annual reports on each individual Replenishment-funded Assignment in accordance with the EBRD reporting format.

Article 3. General provisions

3.1. This Supplementary Agreement shall enter into force on the date of its signature by the latter of the two Parties and shall expire on the date of termination of the Agreement in accordance with Article 20 (Termination) Agreements.

3.2. This Supplementary Agreement is governed by the terms set out in the Agreement, which remain in force and are valid. The terms of the Agreement are considered to be fully incorporated into this Supplementary Agreement and supplemented by the terms set forth in this Supplementary Agreement.

3.3. All references to the Agreement are considered to be references to the Agreement supplemented by this Supplementary Agreement.

3.4. All terms used in this Supplementary Agreement, which are defined in the Agreement, have the meaning assigned to them in the Agreement, unless otherwise expressly provided in this Supplementary Agreement.

3.5. The Parties to this Supplementary Agreement shall regulate all disputes or disagreements, or claims arising from the interpretation or application of any provision of this Supplementary Agreement or in connection with it, by way of an amicable agreement in the process of consultations and negotiations.

3.6. Nothing in this Supplementary Agreement may be interpreted as a cancellation or other modification, waiver of the immunities, privileges or exemptions granted by the EBRD in accordance with the Agreement Establishing the European Bank for Reconstruction and Development, international treaties or any applicable legislation.

3.7. Nothing in this Supplementary Agreement should be interpreted as a waiver of any immunities in respect of property owned by the National Bank of the Republic of Kazakhstan (the "National Bank") by right of ownership (and/or on the basis of another right), and/or property held in trust by the National Bank.

3.8. This Supplementary Agreement is binding and acts in the interests of the respective legal successors and assignees of the Parties; provided that neither Party may assign or otherwise transfer all or any part of its rights or obligations under this Supplementary Agreement without the prior written consent of the other Party.

3.9. With the exception of the cases provided for in Article 3.8 above, none of the terms of this Supplementary Agreement is enforceable at the request of third parties.

3.10. This Supplementary Agreement may be signed in several copies, each of which, when signed, is a duplicate of the original, with all copies together forming one Agreement.

Russian Russian and Kazakh languages In confirmation of the above, the undersigned, acting through their duly authorized representatives, have signed this Supplementary Agreement in Kazakh, English and Russian languages in 3 (three) original copies each in Kazakh, English and Russian, 1 (one) for the Government and 2 (two) for the EBRD. In case of inconsistency or discrepancy between the three-language versions, the English version shall prevail.

FOR THE GOVERNMENT OF THE REPUBLIC OF KAZAKHSTAN Signed:_______________________ Full name:_______________________ Position: _______________________ Date: _______________________

FOR THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT Signed: _______________________ Full name: _______________________ Position: _______________________ Date: ______________________

Appendix 1 to the Supplementary Agreement and Agreement on Cooperation between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development on the Technical Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development in relation to the Technical Cooperation Program dated July 1, 2013

Appendix 1: Technical Cooperation Program of the Government of the Republic of Kazakhstan and the EBRD

Capitalized words and expressions in this Appendix 1 (Technical Cooperation Program of the Government of the Republic of Kazakhstan and the EBRD), but not defined in this document, have the same meaning., as in the Cooperation Agreement between the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development regarding the Cooperation Account of the Government of the Republic of Kazakhstan and the European Bank for Reconstruction and Development under the Technical Cooperation Program dated July 1, 2013, as amended (the "Agreement") when used in this Appendix 1 (Program Description).

The relevant government agency of the Republic of Kazakhstan, which is the beneficiary of the Assignment, is responsible for promoting and striving to implement the reforms and recommendations proposed in accordance with such Assignment.

The program is designed to help achieve the overall goal of improving the competitiveness and efficiency of the sectors listed below, as well as (a) making them attractive to foreign and domestic investors by improving regulatory systems, cost recovery rates and transparency; (b) encouraging market fundamentals; (c) promote industry best practices; (d) promote gender and economic inclusion; and (e) strengthen the role of the private sector, which contributes to the modernization and diversification of Kazakhstan's economy.

The Program includes Assignments in such sectors of the economy as financial organizations; infrastructure, including transport and logistics; public utilities infrastructure; electric power and energy resources; processing industries and services; agro-industrial complex; telecommunications, media and technology, as well as other sectors that the Government of the Republic of Kazakhstan and the EBRD consider to be strategically priority for both Sides and in which the EBRD has the necessary work experience and qualifications.

The Government has appointed the Ministry of National Economy (hereinafter referred to as the Ministry) as the authorized body for all communication within the framework of the Agreement, as well as for coordinating on its behalf the processes of implementation and supervision of the progress and results of this Program and the Account.

The Ministry will act as an independent and objective authority with the capacity to coordinate and promote the implementation of economic reforms proposed under the Program, especially in cases where the beneficiaries of the Assignment are more than one government agency.

The main areas of the program's implementation will be concentrated in the following industries:

a. Transport

Investments in infrastructure remain one of the priorities in the Donor's activities in the interests of ensuring the country's economic growth. The main tasks in the transport sector include:

1) modernization and decarbonization of road infrastructure in order to ensure stable connectivity between regions;

2) modernization and expansion of railway infrastructure and rolling stock in order to increase transit potential;

3) development of logistics centers and warehouses on the main transport routes; and

4) modernization of the infrastructure of ports and airports.

According to the Program, the Parties will solve various tasks that are specifically sub-sectoral in the transport industry and an incomplete list of which is summarized below.

The road industry

The Government plans to attract private capital to finance capital-intensive infrastructure, especially in the road sector, as far as possible; ensuring better road infrastructure, improving road safety and further strengthening the institutional capacity of road authorities are also important aspects. Thus, the implementation of Tasks can be aimed at:

1) solving various issues related to improving road safety and digitalization of transport infrastructure (through modeling information on construction and paired digital technologies);

2) building the institutional capacity of government agencies regulating the road industry;

3) development of an infrastructure network for charging electric vehicles;

4) more extensive use of the public-private partnership (hereinafter – PPP) model in the construction and maintenance of highways; and

5) Promote inclusive procurement to ensure broader and safer access to skills and employment for women, youth, and other target groups.

Railways

The reform process in the railway industry provides for the transfer of freight transportation to commercial rails, the introduction of competition principles by opening equal access to railway infrastructure and the introduction, as far as possible, of a system for concluding contracts for passenger transportation with a social burden. The key elements of the ongoing reforms are the reform of the regulatory system of this sector, the creation of an independent regulator in it. Assignments in this area can be directed to:

1) identification of existing shortcomings and building the institutional capacity of government agencies regulating the railway industry;

2) improvement of the regulatory framework with special attention to the methodology of tariff formation;

3) preparation of energy efficiency audits and feasibility studies;

4) improving project implementation, including procurement procedures and environmental and social action plans;

5) Improving corporate governance standards;

6) preparation and examination of projects, including preparation of feasibility studies;

7) entry into the initial public offering of shares (hereinafter referred to as the IPO) and privatization of state-owned railway companies;

8) carrying out other activities that the Parties consider necessary; and

9) Encouraging inclusive procurement with broader and safer access to skills and employment for women, youth and other target groups

Other infrastructure investments, including logistics centers, ports and airports

Assignments may be aimed at the preparation and examination of projects, including the preparation of feasibility studies, including those that provide support for the involvement of the private sector in the operation of port and airport infrastructure.

As a result of the implementation of this Program, the Parties expect to achieve the following in the transport sector::

successful financial completion of at least one PPP in the road industry;

development of smart road infrastructure ready for electric vehicles operation;

greater independence in the activities of the highway administrations and, eventually, the creation of a completely financially and operationally independent highway authority for the management of the national highway network;

increased investment in the development of the railway industry, especially in the electrification of the infrastructure network and the modernization of the locomotive fleet; the emergence of a transparent and independent regulatory body for the railway industry;

an increase in the number of transport projects in Kazakhstan, including ports, airports and in the private sector; and

inclusive and gender-responsible infrastructure and services.

b. Telecommunications and information technology

Currently, Kazakhstan is increasingly feeling the need to use modern information and communication systems in the country's regions, as well as in its main cities – Astana and Almaty. The main goals and investment needs in the telecommunications sector include the following:

1) investments in infrastructure that is not yet well developed in the regions, such as regional fixed (terrestrial) and cellular broadband systems in order to provide higher speed, reliability, more complete coverage and access;

2) investments in high-quality underground infrastructure with potential open access, including, but not limited to, the creation of neutral data center operators, transit operators, tower infrastructure operators, and open access to wholesale fiber;

3) investments in maintenance, repair and technical modernization of existing infrastructure to support the continuous and high-quality provision of vital telecommunications services;

4) Information technology products and service verticals;

5) innovative e-commerce platforms and electronic solutions, including, but not limited to, the provision of e-mobility/delivery services, marketplaces, media, classified information, etc.;

6) Fintech and payment solutions;

7) facilitating access to financing from venture capital; and

8) privatization and commercialization of state-owned enterprises.

The program is aimed at solving the problem of further liberalization, increased competition and increased participation of the private sector, attracting foreign investment in the telecommunications and information technology sector. The tasks in the field of telecommunications will be aimed at:

1) conducting an analysis of the tasks of the transition process in the field of telecommunications;

2) identifying deficiencies and building the institutional capacity of government agencies involved in regulating the telecommunications sector;

3) improvement of the regulatory framework for regulating the sector, with special attention to tariff formation methodologies and rules for access to the networks of dominant operators;

4) conducting market research and developing development strategies for selected telecommunications companies and (or) projects;

5) improvement of procurement systems operating in state telecommunication companies;

6) improving corporate governance standards in telecommunications companies;

7) preparation and examination of projects, including preparation of feasibility studies, taking into account the technical, commercial, legal and other required assessment elements;

8) IPO or reorganization (through transfer/separation) of state telecommunication companies or their parts;

9) conducting research to identify opportunities for the development of transit of telecommunication flows through the Republic of Kazakhstan;

10) an assessment of gender issues and missing skills in the telecommunications sector; and

11) carrying out other activities agreed upon by the Parties.

As a result of the implementation of the Program, the Parties expect to achieve the following in the telecommunications and information technology sector::

improving the quality and access to the Internet;

increased investment in telecommunications and information technology;

further development of telecommunication infrastructure, especially in the regions and rural areas;

the expansion of the telecommunications and information technology services market and an increase in the penetration of telecommunications services, especially broadband;

demonstration of new types of products and services in the field of telecommunications and information technology;

ensuring accessibility of universal and modern communication services for the population;

improvement of the regulatory and regulatory framework in the field of telecommunications.

c. Electric power industry and energy resources

The strategy in the electricity and energy sector of Kazakhstan is to transform it by implementing a Low–carbon Development Path to achieve carbon neutrality by 2060 (hereinafter referred to as the Path), which was developed and adopted by the Ministry of Energy of the Republic of Kazakhstan in August 2022 in accordance with the memorandum of understanding signed between the EBRD and the Ministry of Energy on March 31. In 2021. The path is in line with the Strategy for Achieving Carbon Neutrality until 2060 (hereinafter – SDUN), which was approved in February 2023 and establishes a more focused approach to the development of the energy industry to achieve carbon neutrality in the country. According to the commitment made at COP 26 in Glasgow, Kazakhstan should reduce its share of coal-fired electricity generation from 70% to 40% and increase the share of renewable energy sources to 15% by 2030.

The Program will support the development of renewable capacities and necessary infrastructure, including, but not limited to, storage, energy systems and networks, as well as flexible capacities in accordance with the objectives of the Paris Agreement. The Program also provides for the possibility of supporting the development of green hydrogen production and the creation of the necessary infrastructure to ensure consumer access, and this may require upgrading existing gas transmission pipelines to ensure their readiness for hydrogen. The Program will support projects that meet the following key criteria:

1) support the development of renewable energy projects (wind, solar, hydro) and the necessary regulatory framework to increase the number of cost-effective renewable energy projects;

2) support for the development of energy storage systems (e.g. batteries, hydraulic storage systems, etc.), including integrated systems with renewable capacities;

3) support the development of capacities and infrastructure for the production of green hydrogen, including the transportation of hydrogen and the modernization of the existing gas transmission system for hydrogen;

4) support the modernization of existing and development of new electricity networks and distribution systems in Kazakhstan to ensure reliable supply, reduce technical and commercial losses and connect new renewable capacities;

5) support the conversion of existing power plants from coal to gas and the construction of new flexible gas capacities in accordance with the SDN, the Paris Agreement, by developing energy using the best available technologies (hereinafter – BAT) that have passed an economic assessment, including taking into account the cost of carbon. The chosen technology should be such that in the future it can be converted to run on carbon-neutral fuels (for example, green hydrogen) and have a low risk of blocking; and

6) Promote greater access to skills and employment for women, youth and other target groups.

The main task should be to implement the general recommendations included by the EBRD in previous Assignments, as well as to use knowledge and best international practices.

Key project assignments may include, but are not limited to, project preparation, evaluation, and implementation; feasibility, market, economic, climate, socio-environmental, and other design studies; implementation of international financial reporting standards; preparation for an IPO; improvement of procurement rules (to ensure compliance with the EBRD procurement rules); and specialized training of current and potential borrowers. The Account's funds can be used to develop a regulatory framework and market structures for electricity and new products such as green hydrogen.

As a result of cooperation in the energy sector, the Parties will strive to achieve:

decarbonization targets set in the SDN and reduction of greenhouse gas (GHG) emissions in the industry;

sustainable and reliable supply of electricity and green hydrogen to consumers in Kazakhstan and abroad;

integrated and rational use of natural resources (wind, sun, earth), which will also allow Kazakhstan to develop new products and skills to take its place in the value chains in renewable and green hydrogen.

d. Municipal and environmental infrastructure (hereinafter – MPEI)

In terms of advancing the transition process, the EBRD's main objective in the field of municipal infrastructure is to assist in improving the efficiency and quality of public services through investments, establishing independent, well-managed and financially stable operations based on commercial principles and in a well-functioning and market-oriented institutional and regulatory framework.

The key drivers of the EBRD's impact on the transition process in the sector are decentralization, commercialization, energy efficiency, environmental and social improvement.

The MEI sector in Kazakhstan currently includes the following areas: water supply and sanitation, urban transport, traffic management, solid household waste management, district heating, street lighting and health facilities management. The main point of its activity is the possibility of mobilizing large grant funds for technical cooperation to assist in the preparation and implementation of projects, capacity development and the formation of organizational structures at the client and national levels.

Through the implementation of the Program, the Parties will address the challenges of further commercialization, increased competition and increased private sector participation, and attracting foreign investment through commercially sound public utility PPP schemes. The tasks will be aimed at carrying out activities in the following main areas::

preparation of PPP projects in the field of municipal infrastructure, including, inter alia, conducting feasibility studies, preparation of PPP agreements and tender documentation in accordance with the legislation of the Republic of Kazakhstan and international best practices;

improving the national framework for the legal regulation of the PPP sector in relation to municipal infrastructure services, including, inter alia, the establishment of long-term tariffs for municipal services;

development of industry modernization strategies based on the application of international best practices (for example, in the field of solid waste collection and disposal);

providing support to city administrations and municipal enterprises in the preparation of bank-eligible financing and commercially profitable projects based on the application of advanced international standards and project implementation;

d. Municipal and environmental infrastructure (hereinafter – MPEI)

The key drivers of the EBRD's impact on the transition process in the sector are decentralization, commercialization, energy efficiency, environmental and social improvement.

development of industry modernization strategies based on the application of international best practices (for example, in the field of solid waste collection and disposal);

support of city administrations in the implementation of projects, including at the stages of procurement and tenders, the implementation of environmental and social action plans, gender and inclusion-related measures, as well as capacity-building in corporate development and support for tariff reforms;

Support cities/administrations in developing action plans under the EBRD's Green Cities Program (hereinafter referred to as GCAP), helping cities formulate their sustainable development challenges and develop a politically and economically sound investment and policy plan for the transition of cities to greener paradigms; and

conducting other events by agreement of the Parties.

As a result of the implementation of this Program, the Parties expect to achieve the following:

an increase in the number of MPEI projects meeting the banking criteria in Kazakhstan;

attracting private investment in public utilities;

the growth of investments in the field of MPEI;

further development of the regulatory framework in the interests of ensuring the commercial profitability of the MPEI sector;

improving the quality of public services;

improving environmental and social protection standards and equal opportunity standards;

an increase in the number of projects addressing environmental and climate issues; and

creation of a well-functioning and market-oriented institutional and regulatory framework.

e. Support for Kazakhstan's carbon neutrality goals by 2060

Subject to the availability of funds and approval by the EBRD, in accordance with its policies and procedures, the EBRD will provide technical assistance to develop the policies and regulations necessary to achieve the Nationally Determined Contributions of the Republic of Kazakhstan, approved by Government Resolution No. 313 dated April 19, 2023, provided that such policies and regulations comply with the Agreement, as well as the objectives and functions of the EBRD.

f. Industry and services

Kazakhstan has far-reaching goals of diversifying its economy and promoting the growth of industry and services in the country to replace significant imports of non-food products. The main objectives and investment needs of industry and the service sector include:

1) encouraging investments by foreign and local sponsors in new projects aimed at developing the production of goods, or as a contribution to the relevant value chain;

2) Development and implementation of sustainable decarbonization roadmaps for existing companies with high CO2 emissions, both at the industry and company levels;

3) investing in warehouse infrastructure in order to create regional hubs and reduce the time and cost of transportation;

4) providing selective support to transparent private producers; and

5) expansion of existing capacities through the introduction of BAT and investment in value chains.

Under the Program, the Parties will seek to increase competition and private sector participation, as well as raise industry standards. Assignments in the industrial sector will focus on the following:

1) development of roadmaps for sustainable decarbonization for certain industries and companies, taking into account their specifics;

2) analysis of market conditions and assessment of demand for products;

3) improvement of environmental standards of corporate governance of private manufacturing companies;

4) preparation and evaluation of projects, including preparation of a feasibility study;

5) Promoting greater access to green and digital skills and employment for women, youth and other target groups; and

6) other activities as agreed by the Parties.

As a result of the implementation of the Program, the Parties expect to achieve in the industrial sector (including retail trade):

an increase in the number of projects in Kazakhstan; an increase in the volume of investments in the industry from both foreign and local sponsors;

introduction of new products and development of the manufacturing sector;

large volumes of investments in value chains;

significant reduction of CO2 emissions by high-emission companies; and

inclusive and gender-sensitive services and practices.

g. Agro-industrial complex

Kazakhstan needs to further increase its potential in agriculture and food production by improving the infrastructure in this sector throughout the country, diversifying the range of products, increasing labor productivity and quality standards. The main objectives and investment needs of the agro-industrial complex include:

1) investments in all segments of the value chain, such as agrochemical products, modern production of agricultural raw materials, packaging materials and retail enterprises;

2) providing selective support to transparently operating producers of agricultural goods and firms selling primary agricultural products, as well as producers of food and non-alcoholic beverages; and

3) assistance in the implementation of initiatives aimed at strengthening agro-industrial activities through investments in infrastructure projects (for example, the construction of grain terminals, logistics and distribution centers, warehouses or environmental facilities for shared use, such as biomass utilizers for electricity generation, jointly operated water treatment plants, etc.), as well as digitalization and the introduction of new technologies. technologies (for example, AgriTech/ FoodTech).

With the help of the Program, the Parties will be able to increase competition, attract private capital to the industry, and raise industry standards. Tasks in the agro-industrial complex can be aimed at:

1) conducting an analysis of the problems of the transition process in the industry;

2) conducting analytical studies of market conditions and developing strategies for the development of agro-industrial companies and (or) projects;

3) raising the standards of corporate governance of companies in the agro-industrial complex;

4) preparation and examination of projects, including preparation of feasibility studies;

5) Promoting greater access to green and digital skills and employment for women, youth and other target groups; and

6) other activities as agreed by the Parties.

As a result of the implementation of the Program, the Parties expect to achieve the following in the agro-industrial sector (including food production and retail enterprises)::

An increase in the number of projects being implemented in Kazakhstan.;

the growth of investments in the industry;

further development of the infrastructure for the production of cereals, fruits and vegetables, as well as products of processing agricultural raw materials;

significant reduction of CO2 emissions by high-emission companies; and

inclusive and gender-sensitive services and practices.

g. Agro-industrial complex

1) investments in all segments of the value chain, such as agrochemical products, modern production of agricultural raw materials, packaging materials and retail enterprises;

1) conducting an analysis of the problems of the transition process in the industry;

2) conducting analytical studies of market conditions and developing strategies for the development of agro-industrial companies and (or) projects;

3) raising the standards of corporate governance of companies in the agro-industrial complex;

4) preparation and examination of projects, including preparation of feasibility studies;

5) Promoting greater access to green and digital skills and employment for women, youth and other target groups; and

6) other activities as agreed by the Parties.

As a result of the implementation of the Program, the Parties expect to achieve the following in the agro-industrial sector (including food production and retail enterprises)::

An increase in the number of projects being implemented in Kazakhstan.;

the growth of investments in the industry;

further development of the infrastructure for the production of cereals, fruits and vegetables, as well as products of processing agricultural raw materials;

the release of new types of products, as well as the improvement of quality standards for manufactured products; and

inclusive and gender-sensitive services and working methods.

h. Financial sector

The EBRD's financial sector strategy is aimed at achieving a sustainably functioning financial model, including by reducing government involvement in the banking system, increasing transparency and quality of ownership, and improving corporate governance, stimulating the transition to a green economy with low carbon emissions, and stimulating inclusive economic development to ensure equality of opportunity through the financial sector. and strengthening the financial sector's readiness to respond to challenges, "preparing it for the future."

The banking sector will continue to be the main channel for channeling EBRD funds to finance micro, small and medium-sized businesses (hereinafter referred to as SMEs), in particular those with female managers, and projects to improve energy efficiency and combat climate change. In order for Kazakhstan's financial system to be able to consistently perform this function, the EBRD will also aim to further promote and support the development of the local currency and the creation of capital markets in the country through the involvement of non-bank intermediary financial institutions (NBFPS) in this process, building institutional capacity by providing technical assistance at the macro and micro levels. (in relation to projects).

In particular, the EBRD will continue to support the private direct investment sector developing in Kazakhstan in order to ensure sufficient reserves of risk capital in addition to sources of credit attraction. In addition, the EBRD will provide further support to microfinance and leasing organizations.

The main strategic priorities include measures to assist in the transformation of the financial sector by providing support to strengthen the capital of the 1st and 2nd levels of partner banks, term loans and the opening of trade credit lines, taking into account the above priorities, and contributing to the development of local capital markets. The planned Tasks can be directed to:

1) capacity building (in matters of risk management and corporate governance) of partner banks, microfinance organizations, leasing companies and NBFPS;

2) advising the financial regulator on improving corporate governance, risk management and other aspects of financial sector regulation, as well as inclusive lending practices, digital solutions of financial institutions, environmental, social management aspects and climate risk management;

3) efforts to resolve problem loans (hereinafter referred to as PC) by advising on strategic issues regarding the regulatory framework (for example, creating conditions for private sector participation in PC markets);

4) advanced development of an active and efficient money and capital market;

5) Expansion of the Trade Facilitation Program, including digital trade financing;

6) increasing the financing of the "green" economy (hereinafter referred to as the FSE) and the use of the FSE infrastructure outside partner organizations by providing support in (i) the development and launch of "green" financial products, (ii) identification and evaluation of "green" projects, (iii) impact monitoring, and (iv) the implementation of international best practices in climate-based corporate climate management (hereinafter referred to as COC) and climate risk management in accordance with TCFD recommendations; and

7) Continued provision of consulting services to support female-led SMEs.

i. Natural resources

The main engines of Kazakhstan's economy are the oil and gas and mining industries. These industries are mainly represented by large companies and, due to the use of outdated technologies in a number of fields, they cause great damage to the environment. The EBRD's main tasks in these industries are to support the development of competition, attract private and independent companies to them; introduce environmentally friendly technologies for increased efficiency and productivity; and support the formation of a sustainable regulatory and legal framework.; assistance in building up the value chain, providing assistance to suppliers and service providers in these industries.

As part of the Program, the Parties will pursue further liberalization, increased competition, and increased involvement of the private sector and foreign investment in extractive industries. Tasks can be aimed at:

1) conducting an analysis of the tasks of the transition process in these industries;

2) improvement of the regulatory regime for the regulation of extractive industries with a special focus on the development of new rules for the selection of subsurface use facilities and the subsequent development of new deposits on the basis of subsurface use agreements;

3) development and implementation of decarbonization roadmaps in industries and individual companies;

4) raising corporate governance standards in subsurface user companies;

5) preparing the country for full-scale involvement in the implementation of the extractive Industries Transparency initiative;

6) providing greater access to green and digital skills and employment for women, youth and other target groups; and

7) other activities as agreed by the Parties.

As a result of the implementation of the Program, the Parties expect to achieve the following in the extractive industries::

increasing the number of subsurface users;

an increase in investment volumes in this sector and throughout the entire value chain;

raising awareness among industry participants about the importance of decarbonization;

reducing greenhouse gas emissions;

increase the transparency of the industry; and

inclusive and gender-sensitive policies and practices.

j. Development of small and medium–sized enterprises (hereinafter referred to as SMEs)

Today, the Kazakh economy is still dominated by large companies, with many industries suffering from excessive concentration and barriers to entry by new, smaller players. Many of the largest players are state–owned companies belonging to Samruk-Kazyna Holding and others.

The SME sector, including microenterprises and the self-employed, continues to be the main source of jobs in the economy. At the same time, the vast majority of SMEs account for the least productive activities in the economy, including small-scale trade, non-trade services, and traditional farming. The middle segment of SMEs is not developing fast enough, especially when it comes to start-ups in the field of manufacturing and information and communication technologies. Access to finance is only a small part of the problem, given that concessional financing and loan guarantees are available under various government support programs.

Other challenges include a lack of skills (entrepreneurial and technical), coordination failures (especially when it comes to initiating new activities and improving efficiency within fragmented value chains where SMEs must rely on the availability of infrastructure and services in extractive and industrial sectors, both public and private), and a lack of transparency in procurement by the government and state–owned enterprises (hereinafter referred to as SOEs), given that they make up a significant share of the economy).

The EBRD implements a modern SME financing and development program (hereinafter referred to as the SME FIRM) in Kazakhstan, which combines SME financing (both direct and indirect, through partner banks) and consulting services provided by certified local and international consultants. Since the beginning of the COVID-19 pandemic, the EBRD's consulting activities have acquired a very strong digital dimension when it comes to both delivery and content (helping companies adapt modern IT solutions and acquire e-commerce capabilities). In addition to consulting services aimed at individual companies, the EBRD provides selective technical assistance aimed at developing supply chains and integrating into existing value chains, such as dairy production.

The EBRD's direct financing and credit lines for SMEs are provided taking into account additional priorities, including support for companies run by young people and women, and the promotion of environmentally friendly and energy-efficient solutions. Finally, the EBRD is also actively involved in a strategic dialogue with SMEs (seeking to improve existing support policies, as well as ensure that they achieve their stated goals and are effective, improve SME statistics, and create an appropriate monitoring and evaluation system).

This program is aimed at the following parameters:

1) Improving the strategic framework for SMEs

Goal setting. Fiscally expensive schemes, such as interest rate subsidies, should be aimed at achieving desired economic results, which require subsidies (eliminating market failures). Instead of supporting entire industries (for example, agriculture), the goal should be to support investments in innovation (product or process), to address coordination and information issues that hinder SME activities, inclusivity (women-led SMEs, youth support programs, professional development), or to support green investments, aimed at eliminating negative external impacts on the environment. The intended use of funds should be linked to these types of investments.

Creating a system for independent and objective evaluation of project results, linked to the payment of subsidies, will be key to ensuring efficiency. It is advisable to pay subsidies upon completion of projects, ex-post, based on a thorough assessment of their results. This is the EBRD's practice regarding credit lines to improve the energy efficiency of enterprises. The payment of subsidies prior to the start of the project, ex ante, will lead to a weakening of the incentives for recipients of subsidies to achieve results and an increase in administrative costs associated with the implementation of projects. From time to time, the parties may conduct a joint analysis of the effectiveness of SME support measures, as well as existing project monitoring and evaluation mechanisms, in order to develop proposals for the implementation of best international practices in SME support, as well as monitoring and evaluating their effectiveness.

Advisory support. To facilitate the achievement of the desired goals mentioned above, SMEs could benefit from a combination of financial and advisory support. This ensures that SMEs receive technical know-how where necessary, along with financing, which reduces the risk of failure. The EBRD has a proven model and experience, especially in the field of green investments, as well as other areas that could be considered (for example, digitalization, innovation, inclusivity, expansion of export potential, etc.). An integrated approach (consulting services combined with access to finance) will accelerate the growth of SMEs.

Government guarantees on loans. For broader financing purposes, the possibility of using guarantees (i.e. guarantees of the first loss of up to 10% of each individual loan, rather than a portfolio approach, which may lead to false incentives for local banks, for example, the current program "Women in Business" led by the EBRD since 2015) instead of subsidizing the interest rate bids. Depending on the scheme, guarantees tend to be less costly and better match the market decision-making process. It would be useful to review the risk-sharing agreements between the Government (Damu) and commercial banks to ensure that banks have strong incentives to verify loan applications against agreed criteria. A key vulnerability in this context may be the ability of Damu to process applications from banks individually. The EBRD can share lessons learned from its own risk-sharing experience.

Review of the regulatory framework for secured transactions. Collateral is a key component to facilitate SMEs' access to finance, as it reduces risks, which in turn leads to lower interest rates. The Government can play an important role in this context by creating a legal framework that provides flexible and reliable security options supported by up-to-date registries. It is possible to analyze the existing system in Kazakhstan (transparent registration, valuation practices, types of collateral accepted by commercial banks) in order to identify bottlenecks. A review of credit reporting practices may also be considered. The EBRD has extensive experience in supporting governments in reforming secured transactions.

2) Increased demand for SME products and services

This may include measures to strengthen both domestic and external demand.

Analysis of procurement practices of SOEs and government agencies. SOEs or government purchases of SME products/services can become a very large source of domestic demand. Procurement processes can be organized in such a way as to facilitate the participation of SMEs, providing SMEs with business opportunities and strong incentives to innovate in order to provide the required products and services. This should be accompanied by public awareness campaigns and the provision of information focused on SMEs. Cross-rail in the UK is a good example of government procurement aimed at encouraging the participation of SMEs.

Encouraging long-term contracts and vertical integration to create more inclusive supply chains (reverse factoring) between SMEs and large private sector buyers, including foreign investors (large private sector buyers such as retailers, food processing companies).

Implementation of measures to facilitate SMEs' access to export markets (consolidation, logistics, branding, certification and quality control, trade finance). An example is the EBRD's branding program in Ukraine. Israeli exports of fruits, vegetables and freshly cut flowers to European and other markets have been carried out under a single brand (Carmel) through the Agrexco PPP for more than 50 years.

3) Strengthening value chains

The integration of SMEs into existing (or new) value chains can enhance their competitiveness by increasing their attractiveness for financing and improving product standards/quality. Currently, very few SMEs are able to develop stable links with export-oriented aggregators, which leads to the fact that the majority of small companies compete with each other in small local markets. At the same time, certification, an important aspect for international value chains, can be expensive for SMEs. Lessons can be learned from a number of examples in the EBRD's countries of operation and beyond, including the following:

Formation of clusters/ association of small producers. This can be a very useful approach that allows small producers to participate in the supply chains of large buyers, acquire certificates, and achieve scale in production, marketing, access to finance, transportation, and logistics. The association can help to effectively conduct training and group consultations (the current practice of the EBRD).

Public investment in R&D or key infrastructure elements to unlock private sector investment throughout the value chain. For example, when the Taiwanese sugar industry was hit by declining global prices, the government responded with a $65 million investment program to develop a world-class orchid growing industry. Individual farmers considering whether to invest or not had to be sure that their greenhouses would be serviced by the necessary infrastructure and public health systems, as well as that there would be a modern network of refrigerators to bring their flowers to market. To solve this chicken and egg problem, the Taiwanese government has invested in key elements of the orchid growing ecosystem, such as the creation of a genetic laboratory, quarantine site, and specialized shipping and packaging areas. Taiwan's orchid industry has grown thanks to these investments, exporting almost 200 million U.S. dollars in 2019, accounting for about 90% of the country's total exports of flowers and seedlings. The EBRD could potentially provide advisory services on public sector services to potentially unlock private sector investment.

Assistance in the creation and financing of domestic franchising as a means of expanding successful business models (automotive, retail, hospitality, catering, education, etc.) and improving the quality standards of services and products. The EBRD has relevant experience in Central Asia and other countries.

Support the development and promotion of domestic brands in both local and foreign markets through consulting and technological support.

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1 Working Group on Climate-related Financial Publications (https://www.fsb-tcfd.org /)

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