The President of Kazakhstan Engineering National Company JSC
Marat MUKHAMEDIYAROV:
KAZAKHSTAN HAS ALL CONDITIONS FOR THE FULL DEVELOPMENT OF DEFENSE INDUSTRY
Kazakhstan intends to enhance its domestic military-industrial complex in the near future. The President of Kazakhstan Engineering National Company JSC Marat Mukhamediyarov has shared his outlooks on the defense industry development with Interfax-Kazakhstan.
- Marat Yelzhasovich, Kazakh President has listed Kazakhstan's core development areas for 2020 in his recent address to the nation. The state program for industrial development has become one of the key priorities. How is your company going to contribute into this project?
- The company is going to make the most direct contribution. We are currently operating 17 business units, including engineering plants and centers that are partially managed by our foreign partners.
As it is known, the company is a holding that merges various engineering enterprises. We focus on the production for oil and gas industries, rail, energy, agriculture, defense and other sectors of the economy. The company works on the development of high-tech products and provides complete engineering services from concept to completion.
The approved consolidated budget of the company for 2010 entails a 30% output growth and a 14% increase in the enterprises overall performance.
- Kazengineering had planned to export 30% of its production in 2009. Did you succeed and what are your plans for 2010?
- According to our preliminary estimates, exports exceeded 60% of the company's defense production volume and over 15% of the total output. It is not related just to the increase in export volume per se, but also to the decline in the state defense order. It is correlated with the global crisis.
We haven't fully decided on the plans for 2010, as the government has not yet presented its order. But we intend to increase the total volume of military and dual-use production by 50-60% and hence enhance the exports.
Most of military-industrial ventures built in the Soviet Kazakhstan used to specialize in naval production. It still dominates our exports. We also ship dozens of aviation products, parts and assemblies for aircraft construction and repair enterprises of the CIS (Russia, Ukraine, Belarus and Uzbekistan).
- What are the development targets for the company's affiliates, such as "ZIKSTO", PZTM, "Zenith", "Semey Engineering"?
- We plan to change the organizational structure so that the similar companies should be in the same division and we also plan to build new plants. Thus, JSC PZTM and JSC Semey Engineering will belong to the land weapons division, JSC Ural Plant "Zenith" to the shipbuilding division, JSC ZIKSTO to the ammunition division, and so on.
All the plants will have special maintenance centers to offer repair and upgrading services.
Besides, we are planning to organize research laboratories as well as centers for designing and introducing arms and military equipment.
We intend to invite foreign investors, to establish cooperation with the leading educational institutions of the republic and ask the Kazakh scientists and engineers to participate in our programs aimed at developing the defense industry. We have already created a center for introduction of arms control systems.
- Kazengineering planned to start producing up-to-date military systems at JSC S.M.Kirov Machine Building Plant. The plans were to start manufacturing a certain hi-tech product for exports. Could you give some details about the project: its value, deadline, number of new workplaces?
- In order to manufacture hi-tech products for exports, the following conditions should be met: the plant should have technical capabilities to create an innovative product, financing should be available and there should be a customer to sell this product to.
JSC S.M.Kirov Machine Building Plant is capable of doing designing and research work. For instance, the company successfully implemented a project together with a foreign partner to design and manufacture a sample of up-to-date underwater weapons. The company also won an international competition for the best weapons upgrading project. The specialists working for the company have very many ideas and plans. Unfortunately, not all of them can be realized.
The domestic customers are not interested in our products at all. Besides, the defense ministry does not have money budgeted for research work associated with weapon and military equipment designing and production. We need good advertising campaigns to appeal to our potential foreign customers; we need to participate in international exhibitions, manufacture presentation materials and samples. But the company does not have enough money to do all this work.
The military corporations in the leading countries of the West are supported by their governments, including long-term preferential lending, especially for the exports of hi-tech military products. However, in Kazakhstan this is not still the case. The banking sector of the republic does not offer any long-term loans to the military industry.
- Kazakhstan Engineering once announced plans to start production of small arms ammunition...
- Kazakh National Company Kazakhstan Engineering does not rule out the possibility of building a small arms ammunition factory, although the project bears a few risks.
Our company has not abandoned the project. We are currently studying offers from our potential foreign suppliers.
However, the project did face a few "serious problems. Kazakh military's annual demand for these munitions is not significant at all. Some documents indicate that it is merely a few dozen thousand, besides even that demand is not guaranteed.
It is quite difficult to estimate the export potential. The factory may prove to be unprofitable in the long run. The investments, according to the estimates, may not pay back within 10 years. The risk is high enough. Another thing that must be taken into account that neither project in this area can be a well rounded technological cycle: some part of assembly parts will have to be imported anyway.
This issue requires a political solution that will determine whether the country needs small arms ammunition production.
- Has any progress been made in creation of the joint venture Thales Kazakhstan Engineering? What products it will be focused on?
- The joint venture Thales Kazakhstan Engineering is undergoing its initial stage. The sides were working hard on the development of regulatory and contractual framework of the project.
The enterprise will specialize on the production of communication equipment including tactical HF and VHF Radio Systems for Kazakh military with a possibility of further sales to the CSTO countries. The enterprise will acquire access to last generation technologies and provide staff training. An experimental lot of radio stations is scheduled to roll off the line by the end of 2010.
Along with civilian production, the joint venture will promote the development of the domestic electronics industry. It will both meet the goal of diversifying the economy and also ease dependence of the republic on foreign supplies.
- JV KAMAZ-Engineering conveyor belts stood idle for several months last year. How the plant is doing now?
- That's true, KAMAZ-Engineering has been recently standing idle, as did the Russian car-making industry.
However, the plant is getting back on track, and we look forward to the Customs Union with Russia and Belarus, which will certainly ramp up production later this year. The car making industry is exactly the sector that should see significant benefits from the new customs duties.
- What progress the company made in implementing the navy shipbuilding program designed for 2010-2015?
- The Navy's shipbuilding program for 2010-2015 has been approved, but has yet to receive the final nod. It will most likely to be part of the program I've mentioned earlier.
The Uralsk plant that manufactures and repairs vessels for the Kazak border patrol services is loaded to the full capacity that allows for a continuous quality improvement.
Last fall the Uralsk plant made a high-seed patrol boat, FS-19, for the sea border service that successfully passed the test and sped over 100 km per hour. The test proved that the domestic shipbuilder is competent enough to cope with the navy shipping project.
The Company plans to begin construction of the first domestically made ship for the Kazakh Navy in 2010 along with keeping up shipbuilding for the Kazakh border service units.
- Thank you for the interview.
March, 2009
й 2009 Interfax-Kazakhstan news agency
References are obligatory
March, 2010
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