Temirzhan Kairatovich, exactly two years have passed since you headed the Kazakhstan Engineering holding. Please tell us about the changes and achievements in the Company’s work.
I would like to note that the manager, as a hired manager and professional, should not associate any changes or improvements with appointments to a particular position. A company or enterprise is not one person, it is an economic entity whose total assets, including human resources, are aimed at achieving results.
At the end of 2019, the Company’s Development Plan until 2029 (previously called the Development Strategy) was approved by Government Decree. In addition, an Action Plan and many other documents are approved, in accordance with which management must professionally fulfill its duties.
New specific impulses in the development of the Company are also based on the instructions and messages of the Head of State, for example, in the message “Economic Course of a Fair Kazakhstan”, “the comprehensive strengthening of the defense-industrial complex...” is identified as a priority .
In fulfillment of the requirements of the mentioned documents, instructions and plans of our shareholder (currently - the Ministry of Industry and Construction of the Republic of Kazakhstan), certain positive results were achieved. Let me note once again that this should not be associated with officials or periods of work of the Company’s management. Development and transformation work is carried out systematically and systematically based on processes, finances and personnel.
Let me rephrase the question. What changes and improvements are there in the holding’s work, taking into account the approved Development Plans and instructions of the Head of State?
Here I would also like to detail some aspects that affect the results of the Company’s work. As is known, in 2013 the Company placed Eurobonds on the Irish Stock Exchange, but as a result of the devaluation of the national currency and a certain economic crisis, it found itself in a difficult financial situation. The need to repay debts to Halyk Bank of Kazakhstan JSC and Samruk-Kazyna JSC has hampered development potential for many years.
Probably, one of the Company’s great achievements is the full return of the initially received loan amount from Halyk Bank in the amount of 26.2 billion tenge in January of this year. Unfortunately, there are still outstanding debts remaining. There are specific plans to fully repay loans this year. Taking this opportunity, I would like to express my gratitude to Halyk Bank of Kazakhstan JSC for its support and understanding of the history of this loan.
In addition, plans for the privatization of assets approved by government decree are being implemented; updated information was posted on the website at the link https://ke.kz/ru/press-center/news/5044/ .
In general, our holding is always open to any information, with the exception of information protected by the Law “On State Secrets”. We are actively working with the Public Council and on social networks, answering all questions.
Yes, last year, you answered a number of questions in detail on social networks, in the material at the link https://ke.kz/ru/press-center/news/3992/ . Could you also comment on the main changes?
In March 2022, the main directions for work were outlined in order to fulfill the plans and instructions of our shareholder.
1) Development of specific proposals for reforms of the supply system (not only in the production of military and dual-use products, but also civilian products).
Together with the direct executors of orders, with our factories, we initiated a number of proposals to change procurement legislation. As you know, the activities of all enterprises are related to the supply of goods or services to customers. Customers, when choosing a supplier, are regulated by a certain methodology - laws and regulations. Our Company is trying to make changes to these laws and rules to support and stimulate Kazakh manufacturers. This work is carried out not only in the interests of our Company, but also in the interests of the industry as a whole. Actively interacting with such associations as the Union of Mechanical Engineers of Kazakhstan, the Association of Industrial Suppliers, the Defense Industry Association and others, a number of specific proposals were made. Several meetings were held with deputies of both chambers of Parliament and round tables. Some proposals have been reflected, while others, unfortunately, have not yet. In the article at the link https://ke.kz/ru/press-center/news/5039/ I tried to reveal in detail the need for changes and the introduction of mandatory standards for the development of Kazakhstani manufacturers.
Together with NPP Atameken, we managed to introduce a standard for mandatory purchase and prepayment for Kazakh manufacturers in the system of Samruk-Kazyna JSC. This imperative norm, for example, is actively used by PZTM JSC when supplying oil and gas equipment. Work in this direction remains to be continued. In matters of domestic supply, a priority was determined for the localization of production in Kazakhstan - our factories must purchase Kazakh products to fulfill orders. For this purpose, internal procurement rules have been developed and implemented. Unfortunately, most of the necessary materials are not produced in Kazakhstan. For example, there is no gunpowder or brass sheet in the form of a ribbon.
2) Digitalization and automation of processes.
The Company's work has been transferred to a digital format - from email communications to decision-making (the signing of orders and other documents is completely digitized). Accounting and execution of projects is carried out in electronic format. A data analytics service based on Power BI was launched. If necessary, the Company can operate remotely at any time. The results of the work are implemented at factories.
3) Process optimization, time reduction, production efficiency.
In fulfilling the instructions of the Head of State regarding de-bureaucratization, we tried to optimize and eliminate some bureaucratic procedures. Changes were made to the Rules for the development, coordination, approval, adjustment, execution and monitoring of the execution of documents, monthly reporting was excluded (receiving information automatically), planning and reporting forms were optimized, and approval by budget commissions of financial statements of subsidiaries/dependent organizations was excluded. In general, all kinds of commissions, councils and other documents are excluded. As a result of the audit of internal processes, it was revealed that many add-ons and documents come from the period when the company was part of Samruk-Kazyna JSC.
4) Development of a modern corporate governance system, with clear and understandable KPIs.
An independent assessment, I am sure, will confirm the highest level of the company’s corporate governance system. The parent company, as a corporate center, sets and monitors the implementation of key performance indicators. This is a long-standing and best practice of all major global corporations. The enterprises have successfully implemented and used the set goals, and maintain a system of monitoring their timely implementation by the Company. In addition, employees use SMART KPIs to indicate the performance of each quarter. As part of the internal action plan, there are a number of tasks to improve the corporate governance system. This job is done. For example, candidates for members of the Board of Directors now undergo an open competition procedure.
5) International cooperation.
There are already ready-made solutions for many areas of activity in the world. To apply these solutions, technology transfer is required, as well as the development of our own personnel to use these technologies. To this end, active cooperation is being carried out in various areas of production with various international partners, and joint investment projects are being developed. Over the past two years, more than 200 negotiations have been held to attract investment and new technologies. First of all, our Turkish partners and friends - Turkish Aerospace, Aselsan, Asfat and YDA, PEM Engineering, MKE and others; colleagues from the Czech Republic – Omnipol, VRgineers; Serbian state company Yugoimport and a number of others. In almost all areas, partners from China are ready to cooperate - MRSI, Autel Robotics, Unitree, Droid Levy Science Technology Co. Ltd. Of course, work has continued with historical partners from the Russian Federation, Europe and Israel.
6) Development of new sales markets in the civilian sector.
The company is a machine-building holding company, some of whose factories can carry out military orders. Still, the machine-building holding can fulfill any orders. The main volume of regulated procurement, according to my estimate, is about 30 trillion tenge: this is civil procurement of goods, works and services. Our Company is obliged to be a major supplier in this market. In this regard, constant work is being carried out to participate in tenders and other procurement procedures of the civil market: volumes with customers in the oil and gas sector have been increased 3 times; Volumes with customers in the railway sector have been doubled. To expand the supply of railway products, work was carried out to obtain the conditional number 1222 for branding when carrying out work on the manufacture of a thermos car, a traction clamp wedge, a pendulum suspension, a brake block check, and tanks. Design documentation was purchased from partner countries for the production of freight gondola cars, as well as components and spare parts for the chassis. A robotic ground complex based on a tracked platform has been mastered - a product for the Ministry of Emergency Situations. Separately, I would like to note and thank the Ministry of Emergency Situations of the Republic of Kazakhstan for the ongoing work with Kazakh manufacturers and suppliers: for example, 20 units of unmanned vehicles were delivered. New production in electronics is being developed - walkie-talkies, access control systems. Tenders for the supply of computer equipment were won. We have mastered the production of bushings for oil and gas pumps together with Russian partners.
7) Development of R&D (R&D) direction.
Thanks to grant funding from the Ministry of Science, the R&D scientific center is steadily developing. By the way, previously science was considered as a source of profit, but we have revised our approaches - all funds earned by the center are directed to the further development of science and personnel. Thanks to these measures, the Shagala-M UAV was developed and tested, the Medeu complex was developed and tested, a contract for the sale of target UAVs was signed, and a Competence Center was created - an advisory body of various departments and experts on defense procurement, strategy development and analytics. Agreements have been concluded with leading Chinese companies to re-engineer some developments. The Karakus UAV has been developed and tested.
8) Further development of our wealth - human capital.
In this matter, we focus on the intellectual and physical development of personnel, training young people to work in our factories. A mentoring program is a key element in succession, especially in technical professions. At the same time, you cannot ask employees for results without appropriate motivation. The average salary for subsidiaries reached 291 thousand tenge, which is 35% higher than the 2021 level. The analysis shows that the average monthly salary in 2023 increased from 1% to 44% compared to 2022 in various subsidiaries. It is, of course, difficult to compete in terms of wages with the oil and gas or mining and metallurgical industries, but we continue to develop social policy, as the Head of State instructs us. Students and even schoolchildren undergo internships at enterprises. In their free time, employees study foreign languages and play sports. Some plants also have their own difficulties. In the absence of a contract base, we are losing qualified personnel.
9) Compliance policy.
The entire methodological framework within the framework of compliance control has been developed and approved. Measures are being taken to prevent violations. Compliance is compliance with the requirements, first of all, those put forward by various regulators, as well as monitoring that this compliance is complete. During the period of sanctions confrontations, the role of this function is especially important. The company is not included in any sanctions list and does not violate any requirements.
10) ESG principles.
When talking about sustainable development, you need to understand that all positive changes start with something simple. For example, an employee of the Company’s HR department proactively organizes the collection of glass containers in the office for further recycling. These are the first steps towards ESG. A transition to gas heating is underway. Last year we achieved zero injuries and accidents at enterprises. Relevant checklists have been introduced, and measures are taken to prevent violations and incidents. To ensure working conditions, funds have been found and repairs have been carried out at all facilities, mainly roofs and roofs, as well as insulation of facilities. The development of the state language is the focus of special attention. We also consider knowledge and development of the state language to be part of the sustainable development policy. Recently, as part of an assessment conducted by government agencies, the company's corporate portal took 3rd place among all national companies in compliance with language policy.
At the end of the interview, I would like to thank the customers of the Company’s products and services for their constant support in the development of Kazakhstan’s mechanical engineering industry. In connection with the notice I submitted on February 1, as of March 1, I will terminate my work as Chairman of the Management Board of the Company. I thank, first of all, the professional team of the company and factories, the shareholder represented by the Ministry of Industry and Construction, members of the Board of Directors, partners, the Public Council and trade union organizations for their joint work.
I would like to note that the development of Kazakh production depends not only on orders from large entities, but also on the attitude of citizens towards Kazakh production. Domestic products are in many ways not inferior to foreign analogues, and I am convinced that with the active participation of the population of our country, the manufacturing industry will develop successfully, to which we simply must make an effort.