1 Sep 2023 13:01

Tokayev proposes merging Kazakhstan's two stock exchanges, creating regional commodity exchange

ASTANA. Sept 1 (Interfax) - Kazakh President Kassym-Jomart Tokayev has proposed that the two stock exchanges based in Kazakhstan should be merged.

"Development of the stock market is our next priority. At the moment, there are two stock exchanges in Kazakhstan, which results in duplication of their functions and sometimes competition between them. Such a situation in our financial system is rather redundant. I suggest mulling over a merger of these stock exchanges so that they should be under centralized management," Tokayev said in his state of the nation address on Friday.

Tokayev tasked the government with creating a regional commodity exchange. "It is important to give domestic producers full access to advanced trading instruments. Remaining within the confines of the national trading system is not practical. In collaboration with businesses, we need to explore the possibility of creating a robust regional commodity exchange," Tokayev said.

He said favorable conditions in Kazakhstan support the operation of commodity exchanges, which should have made regulated commerce more accessible.

"The lack of effective regulation has given rise to 'pocket' commodity exchanges. These exchanges act as platforms that stifle competition, circumvent procurement procedures in favor of imports, and unproductive mediation. Regulatory requirements should be tightened to eliminate these activities," Tokayev said.

He said a fund created under the law on the return of capital would be another source of "long" money. All incoming resources should be used as efficiently and transparently as possible to solve country-wide tasks.

In connection with the return of capital, he also said illegally privatized assets siphoned off abroad and returned to Kazakhstan should be transferred to the market on transparent and favorable terms for the state. Tokayev also pointed to the need to speed up the processes of privatization and public IPOs.

Kazakhstan needs to attract three "reliable" foreign banks to increase competition in the banking sector, Tokayev said.

"High concentration is another problem in the banking sector. Today, there are 21 banks operating in the country, and only a few large banks provide corporate lending services to finance economic projects. Therefore, we need to attract three reliable foreign banks to work in our country in order to increase competition in this sector," he said.

Joint and syndicated lending should be used more often so as to improve access to long money for the real sector, according to the president. Corporate lending is also insufficient, he said.

"The net profit of the banks totaled nearly 1.5 trillion tenge last year and over 1 trillion tenge in the first half of this year. Such high profits are not the result of the banking efficiency but can be explained mainly by the high policy rate that the National Bank set to control inflation," Tokayev said.

He asked the government and parliament to ensure that this profit should be distributed more fairly, with the national interests being taken into account.

"Of a great concern is the fact that the financial organizations generate enormous revenues by investing their liquidity in government securities and such revenues are not subject to taxation. This situation is quite illogical and lacks a statesmanlike approach. The government is already dealing with this paradoxical situation. Necessary amendments to the legislation will be submitted to the Majilis," Tokayev said.

Tokayev said some of the money built up by the National Fund could and should be used to finance strategic projects.

"There is discussion about potential sources of financing the economy, and the possibility of using the money from of the National Fund is often mentioned. Experts argue about the balance between the saving and development roles of the Fund. Of course, the saving function should prevail," Tokayev.

The president said that "some of the fund's resources could and should be used right now to finance strategic projects that will shape the future of Kazakhstan".

He said the National Fund already finances a number of large projects, but there is a lack of consistency as far as the selection of projects is concerned.