"Third Modernization of Kazakhstan: global competitiveness"

Dear people of Kazakhstan!

On the eve of a new era, I address to the people of Kazakhstan.

The country with honor has passed its 25-year development phase. We are proud of our country. In celebration of the 25th anniversary of Independence, we noted the achievements and successes of Kazakhstan. They are well known and appreciated by the world community.
Since the beginning of 2017, Kazakhstan has become a non-permanent member of the UN Security Council.

This international exhibition "EXPO-2017" will be held in Astana this year. We were the first among the CIS countries and Central Asia to host such an important global event.

In Almaty started the sports event within the frames of Universiade-2017, with the participation of more than 2,000 athletes and delegates from 57 countries.
All this is the result of a correct political path and the high authority of Kazakhstan in the international arena.

Kazakhstan must enter the top 30 developed countries in the world by 2050. We will surely approach this goal.

In conditions of growing competition and the lack of stability in the world, the relevance of the proposed by me “Strategy-2050” to the people in 2012 is increasing. We were able to timely anticipate the upcoming difficulties.

Due to economic policy "Nurly Zhol" and the Plan of the nation "100 concrete steps" we worthily go through an initial stage of a complex global transformation. Additional 1.7 trillion tenge were allocated to support the economy during the years 2014-2016. This provided an opportunity for economic growth and business support, the creation of more than 200 thousand new jobs.

The result ensured the growth of the gross domestic product by 1% in 2016. This is particularly important in the current difficult conditions.

The situation in the world is rapidly changing. This is a new global reality, and we must accept it.

Dear compatriots!

Only those people who manage to get ahead of the future and decisively meet the challenges, and do not stand and wait, will be the winners.

The fourth industrial revolution began in the world.

Ubiquitous digitalization of the economy will lead to the disappearance of entire industries and the creation of fundamentally new. Great changes are taking place before our eyes – they are both a challenge and a historic opportunity for the nation.

Today I put the task of ensuring the implementation of the third modernization of Kazakhstan. It is necessary to create a new model of economic growth that will provide the country's global competitiveness.
Currently, many countries are trying to solve the same problem. I am sure that the transition to the new growth model will be different in each country. We must proceed from our strengths and not to lose the potential that we created together over 25 years of our Independence.

We all remember the first modernization of Kazakhstan. We remember, how we started walking down our path a quarter century ago on the ruins of the Soviet Union. Then our generation created a new state from the foundation, which was not on the world map.

The transition from a planned to a market economy was ensured. It is crucial for me that back then we all together kept the country from the turmoil of civil war and economic collapse. Kazakhstan came out of that period with minimal losses and the largest acquisitions.

The second modernization began with the adoption of the Strategy-2030 and the creation of new capital of Astana. Its results are undeniable. The country broke away from the zone of economic underperforming and entered top 50 most competitive economies in the world.

Two successful modernizations gave us invaluable experience. Now we need to boldly step forward and start the third modernization.

This modernization – is not the plan to combat the current global challenges, but a reliable bridge to the future, to meet the objectives of the Strategy-2050. It will be held on the basis of the Plan of the nation "100 concrete steps".

I see five main priorities of it. They are designed to ensure that economic growth above the world average, and steady progress among the top 30 leading countries.

The first priority - is the accelerated technological modernization of the economy.

We need to cultivate new industries, which are created with the use of digital technologies. This is an important complex task.

We need to develop the promising sectors in the country, such as 3D-Printing, online commerce, mobile banking, digital services, including health and education, among others. These industries have changed the structure of the economies of developed countries and gave a new quality to traditional industries.

In this regard, I instruct the Government to develop and to adopt a separate program "Digital Kazakhstan".

Следует адаптировать наше законодательство под новые реалии.

It is necessary to adapt our legislation to the new realities.

It is also important to ensure the development of communications, ubiquitous access to a fiber-optic infrastructure. The development of the digital industry will provide impetus to all other sectors. Therefore, the Government should keep under special control the development of IT-sphere.
An important condition for the formation of new industries is to support innovation and rapid introduction into production.

I instruct the Government to establish on the basis of one of the objects of EXPO-2017 an International Technopark of IT-startups. It must become a platform for attracting entrepreneurs and investors from around the world. This requires appropriate infrastructure and an enabling environment, including tax breaks, simplified visa and labor regimes.

We also need to develop scientific and innovative potential of universities on the basis of Nazarbayev University and PIT "Alatau".

The second task is complex. In parallel with the creation of new industries, we should give impetus to the development of traditional basic industries.

These are manufacturing industry, agriculture, transport and logistics, construction and other sectors.

First. It is important to significantly increase labor productivity.

The main factor here should be the widespread introduction of elements of the fourth industrial revolution. These are automation, robotics, artificial intelligence, exchange of "big data" and others.

I charge the Government, together with business to develop a package of measures technological of re-equipment of basic industries until 2025.

Second. We need to continue industrialization with emphasis on the development of competitive export industries in priority sectors.

The Government has the task to increase non-oil exports by half up to 2025.

To activate the work in this direction it is necessary to concentrate the tools of development and promotion of exports in the same department. We need to provide support to exporters on the principle of "single window", including in the regions.

I instruct the Government to create a Council for the export policy. It should include representatives of the business community.

Until 1^st of September this year, the Government together with the akims and businesses needs to develop a unified export strategy.

Kazakhstan needs to keep the lead in attracting foreign investment. International financial center "Astana" should play an important role in attracting financial resources in the economy of the country.

We should be integrated into global chains of production and distribution of goods and services. This should be done primarily by attracting multinational companies.

It is necessary to implement effectively a joint investment program with China to establish production facilities in Kazakhstan. The agreements are reached with the Chinese side. Objects were marked. We need to work with specific focus.

It will be modern production with the creation of about 20 thousand new jobs for Kazakhstan. The launch of six projects has been started and two projects have already been launched. One of them – is a factory for large-assembly of hybrid and all-electric vehicles JAC.

I instruct to study the issue of further development of the production of electric vehicles with export orientation, by providing the necessary infrastructure.

In general, Kazakhstan should have its own investment strategy. The Government needs to prepare it before 1^st of September of the current year.

It is necessary to ensure the protection and promotion of national economic interests in the framework of international cooperation. This applies primarily to work within the EAEU, SCO, together with the Economic Belt of the Silk Road.

We should rebuild and strengthen the work of economic diplomacy.

Third. Mining and oil and metallurgical complex of the country should retain its strategic importance for the sustainability of economic growth.

In the context of slowing global demand, we need to enter new markets and to expand the geography of supplies. Much attention should be given to expanding the mineral resource base. It is necessary to conduct active exploration.

Further development of these industries should be strictly linked to the deepening of complex processing of raw materials.

I am instructing by the end of the year to ensure the adoption of a new Code on mineral resources and introduction of the necessary amendments to the tax legislation.

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Fourth. The agricultural sector has to become the new driver of the economy.
Agriculture of Kazakhstan has a promising future. For many items, we can be one of the world's largest manufacturers of agricultural exports. Especially in production of organic food. The brand made in Kazakhstan should become the standard of such products.

At the same time we have to become so-called "bread basket" for the production of grain for the entire Eurasian continent. We need to shift from primary production to the production of high-quality, processed products. Only then will we be able to compete in international markets.

во-вторых, в течение 5 лет нужно создать все условия для объединения более 500 тысяч домашних хозяйств и малых фермерств в кооперативы;

In this regard, I instruct the Government and Akims on the following:
Firstly, it is necessary to reconsider the principles of allocation of subsidies and gradually move to insurance of production;

Secondly, during the 5 years it is necessary to create all conditions for combining more than 500 thousand households and small farms in cooperatives;

Thirdly, it is necessary to increase the level of processing of products, to create an effective system of storage, transportation and distribution of goods;

Fourthly, it is necessary to increase the level of productivity and to reduce production costs;

Fifthly, we must improve the efficiency of land use. Within 5 years, it is necessary to increase the area of irrigated land by 40%, thereby to increase to 2 million hectares;

Sixthly, it is necessary to increase investment in agricultural research, which will be in demand at production.

I instruct to provide an increase in the export of food products by 40% by 2021 through the diversification of agricultural production.

These tasks should be implemented within the framework of the new state program of development of agriculture.

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Fifth. The development of the new Eurasian logistics infrastructure is an important priority.

Substantial investment has already been injected. Now it is necessary to receive from them economic benefits.

I instruct the Government by 2020 to provide an increase in the annual volume of transit:

- 7 times for goods carried by containers - up to 2 million containers;

- 4 times for passenger transport by air - up to 1.6 million passengers in transit.

It is necessary to increase revenues from transit traffic by 5.5 times - up to 4 billion USD a year.
In 2015, I initiated a program of infrastructure development "Nurly Zhol". Over the past two years, the program has fully justified itself.

In the current year 4,400 kilometers of roads of national importance will undergo construction and reconstruction works. Of these, no less than 600 kilometers with the phased introduction of toll-roads before the end of the year.

For a complete disclosure of the transport and transit potential of the country, we need coordination with neighboring countries. It is necessary to ensure the freedom of transit of goods, the establishment and modernization of transport corridors. Particular attention should be paid to the management of the transport infrastructure, improving service levels and elimination of administrative barriers.

Due to the increasing volume of traffic on the Trans-Caspian corridor, it is necessary to proceed with the second phase of construction of the port Kuryk – for vehicles.

Sixth. Urbanization processes necessitate the development of the construction sector. It must become a full driver of the domestic economy.

It is important not to forget that by investing in the construction of roads, buildings and other infrastructure, we define the physical and technological shape of our cities for years to come. It is therefore important to ensure the transfer of the latest technologies in the construction and in the manufacture of building materials. To do this, we now have good opportunities.

On my instructions, the implementation of the housing program "Nurly Zher" begins this year. It is aimed at solving the most important task - to provide with housing 1.5 million households in the next 15 years.

The program is comprised of comprehensive measures of housing market development. It is cheaper bank loans for developers by providing grants through the state JSC "Damu". We will subsidize mortgage loans for the population, issued by banks, through JSC "Kazakhstan Mortgage Company". The construction of equity shared housing will be continued by Akimats for Zhilstroysberbank depositors. Previously allocated funds will be reused on "revolving" principle.

For the socially vulnerable strata of the population, Akimats will continue to develop rental housing without the right of redemption. For mass housing construction, akims should allocate appropriate land.

We will strive to ensure that the construction of individual houses in the cities is carried out in a single architectural style. To do this, the state will help with the necessary infrastructure.

The Government together with the akims should measures for the development of transport links for connection of the nearest large cities with rural settlements.

The third complex task - is the modernization of the labor market.

Manpower will be released with the introduction of new technologies in traditional industries. However, the creation and development of new industries should become an additional source of real incomes, employment and growth.

I instruct the Government and Akims to create the conditions for a controlled flow of workers in other sectors.

Our large enterprises together with akimats need to develop appropriate "roadmaps". They need to provide co-investment in retraining downsized workers and their further employment. We need to support the mobility of the processes of labor from labor-surplus regions, as well as from rural to urban areas.

The Government should reform the employment centers and create a single online platform for all vacancies and all settlements.
The second priority – is a dramatic improvement and expansion of the business environment.
One of our strategic goals is to ensure that by 2050, the contribution of small and medium-sized businesses in GDP is at least 50%.
Ambitious, but an achievable goal. To solve the problem at this stage, you need the following.

First. The Government by my instructions launched this year a program of productive employment and the development of large-scale entrepreneurship development.

Now the citizens of Kazakhstan in the countryside or in the city can get a microloan of up to 16 million tenge for the business.

It is important to expand the geography of micro-loans, actively use tools of guarantee and service support for entrepreneurs. These measures should be accompanied by the organization of business and financial literacy trainings.

It is necessary to further improve the support tools for large-scale business development. Each region of Kazakhstan has to offer complex measures of large-scale business development, including family run businesses.

The number of new jobs created, as before, one of the key criteria for assessing the effectiveness of activities of the Government and akims.

Second. The Government together with the National Chamber of Entrepreneurs "Atameken" should take measures to reduce all kinds of costs for businesses. Especially the cost of the energy, transport and logistics, as well as utilities services.

Processes of public services should be optimized as much as possible. It is necessary to reduce the time and a list of documents to eliminate duplication of procedures. Thus, it is necessary to translate them fully for provision in an electronic format, without the need for physical presence.

In addition, the existing regulatory burden on business is incompatible with the task of creating a new model of growth.

I set the task for the Government and akims - to develop by 1^st of July this year, the system measures to deregulate business.

It is necessary to implement the best standards and practices of developed countries. It is especially important to carry out this work at the regional level.
Akims together with the Government need to develop detailed plans to improve the conditions for doing business in the regions on the basis of the World Bank ranking.

It is necessary to introduce in the country rating of regions and cities on the ease of doing business. We will establish a special award for the best. We will hand it once a year, on the Day of industrialization.

Third. A new impetus to economic growth should be a reduction of the share of the state in the economy to 15% of GDP, up to OECD levels.

Previously was determined a list of about 800 companies for privatization until 2020. The work is underway.

I instruct the Government to speed up and complete the privatization of companies in this list until the end of 2018.

It is also necessary to accelerate the preparation and entry of our largest companies to IPO.

The introduction of Yellow Pages principle reduced the types of activities for the state in the economy by 47% (from 652 to 346).

The next stage it is necessary until 2020 to transfer to the private sector or to eliminate all state-owned enterprises and organizations, which do not conform to these principles. And that is several thousand enterprises.

The practice, when we created the legal entities for each program or task, should be discontinued.
It is necessary to ensure the transparency and efficiency of privatization. It is also necessary to reconsider the role of state holdings.

I instruct the Government to provide a qualitative transformation of "Samruk-Kazyna" holding. It is necessary to conduct a thorough audit and optimization of both managerial and production business processes. As a result, it has to become highly efficient, compact and professional. The quality of management and corporate governance needs to be pulled up to the international level.

It is necessary to define clearly what to leave behind the state in which important sectors and with what degree of participation.

The state should be left with control over natural monopolies and implementation of strategic projects, including with the participation of TNCs. These projects should give a multiplier effect.

The holdings "Baiterek" and "KazAgro" must undergo reorganization. They must be operators on the implementation of state development programs. At the same time it is necessary to optimize their functions. All that can be done by the private sector, it is necessary to transfer to the business.

They should also deal with the involvement of non-state funding sources for program implementation.
Fourth. Great potential for business development provides an extension of public-private partnership. We are talking about the transfer of a number of government services to business.
We already have good results on their involvement in early childhood education. If in the previous 3 years the state has built 189 kindergardens for 40 thousand places, the private sector has opened its more than 1 300 kindergardens for 100 thousand people. The biggest number of private kindergardens was opened in South Kazakhstan (397), Almaty (221), Kyzylorda (181) regions.

For me an example of PPP in this sector is of fundamental importance. It shows how government and business together solve one of the most important national problems - completely cover children of 3-6 years by pre-school education by 2020.

The development of PPPs depends on the specific and professional work of akims.

In order to attract private capital necessary, it is necessary to use all possible kinds and forms of PPP: trust management of state property, and other service contracts. Thus it is necessary to simplify and speed up all the negotiation procedures, particularly in relation to smaller projects.
PPP should be the primary mechanism for the development of infrastructure, including social.

To modernize housing facilities, it is necessary to transfer them to the management or concession with possible future privatization. The Government should stop standing still. It should get activated in this direction.

Fifth. It is important to prevent price and tariff collusion.

I instruct the Government together with NCE "Atameken" to hold an "audit" of all legislation to identify regulations that hinder competition.
The third priority – is macroeconomic stability.
The key objective here is to restore the incentive role of monetary policy and the involvement of private capital in financing of the economy.

First. Today the National Bank has an important task for the development of the regime of inflation targeting. It is necessary to achieve the phased reduction of inflation to 3-4% in the medium term.

Second. We need a "reset" of the financial sector.

I instruct the National Bank to develop a set of measures to improve the health of the banking sector.

It is necessary to accelerate the work on clearing banks' balance sheets from the "bad loans" and, if necessary, to ensure their capitalization by the shareholders. National Bank needs to be given more rights for the operational control over the state of banks. It must move from a formalized approach to risk-based, to take measures to influence to banks, without waiting for the formal breach on their part.

It is also necessary to strengthen the responsibility of audit companies to ensure transparency and shareholders, as a whole to improve corporate governance. All of these should be fixed at the legislative level.

In order to address the lack of money in the economy and high interest rates on loans, I instruct the National Bank and the Government to take measures to ensure the availability of medium- and long-term funding in tenge.

The National Bank should be responsible not only for inflation, but also together with the Government for economic growth.

Third. Further development of the stock market.

Privatization should give impetus to its development. It is necessary to place equities of the fund "Samruk-Kazyna" on it, that is what I said above. It is necessary to further increase the opportunities for people to invest their savings primarily in various types of securities.
At the end of 2016 we completed the legalization campaign. More than 140 thousand citizens of our country participated in it. In total 5.7 trillion tenge were legalized, including in the form of money - 4.1 trillion tenge.

The task of the Government – is to make these funds to work on the economy, including through participation in privatization. At the same time we also need to consider issues of subsidizing private bond issues of Kazakhstani enterprises.

I instruct the Government together with the National Bank to take measures aimed at enhancing the domestic stock market.

 
  Another key challenge is to adjust the fiscal policy to the new economic realities.

First. It is necessary to radically improve the efficiency of budget spending.

In 2017, we fully provided with the necessary resources the national programs. It is necessary to check the effectiveness of the use of funds by ministries and departments.
It is necessary to start with the Ministries of Labor and Social Welfare, Health, Education and Science, which account for over 40% of the national budget. Give me a report at the end of the audit.

We should reallocate funds from ineffective programs to the programs of the third modernization. In addition, it is necessary to simplify the budgetary procedures for faster and more effective injection of money to the real economy.

We need to continue the policy of fiscal decentralization. In previous years, a large number of functions and powers was transferred from the central to the local level. Now they need to be backed up by sufficient financial autonomy. At the same time it is important to avoid the concentration of spending authority at the regional level. It is necessary to pass them on to the district and village levels. Akims must decide the issues of regional and local importance, and the Government - should focus on national issues.

Second. It is necessary to be more rational with the use of the National Fund.
The size of the guaranteed transfer from the National Fund must be gradually reduced to KZT 2 trillion by 2020.

Tax policy should focus on stimulating business from exit out of the "shadow" and expansion of the tax base in the non-raw sector. It is important to optimize the existing tax incentives. It is necessary to consider new special tax regimes on the eve of the universal declaration.

Tax administration mechanisms require improvement. First of all it concerns the levying of VAT.
Third. The Government needs to build the system of monitoring and control over the external and internal loans of quasi-public sector and to bring it to order.

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The fourth priority - improving the quality of human capital.
First. In the primary place, we must change the role of the education system. Our task – is to make education the core of a new model of economic growth. Training programs should focus on the development of critical thinking, abilities and skills of independent search for information.

In addition, the need to pay more attention to the formation of IT-knowledge, financial literacy and education of youth patriotism. It is necessary to reduce the gap in quality of education between urban and rural schools.

I instruct the Government to submit relevant proposals.

On the issue of a gradual transition to the trilingual education.

The Kazakh language will retain its dominant position. Much attention will be paid to its further development. Today, however, English is the language of new technologies, new industries, new economy. Currently, 90% of the world information is created in English. Every two years, its volume is doubled. Without mastery of the English language, Kazakhstan will not reach national progress.
Since 2019 teaching in some subjects in the 10-11-graders will be held in English. It is necessary to carefully consider this issue and to take action on it reasonable solution.

The level of schools and teachers in urban and rural areas differs greatly. The problem of shortage of qualified teachers is also relevant. Therefore, considering all these aspects, it is necessary to introduce the English language gradually.

I give you a task to submit relevant proposals.

This year on my initiative starts implementation of the project "Free vocational education for all".

In the first place free education should cover unemployed and self-employed young people and people of working age, who do not have professional education. It is necessary to give impetus to the development of vocational education system for training personnel for new productions within the economy needs.

For this purpose, it is necessary to upgrade professional standards in accordance with labor market requirements and best international experience of training in the workplace.

Along with this, special attention should be paid to quality of higher education system. It is necessary to strengthen the control and requirements for the staff of higher education institutions, the level of equipment and educational programs.

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Second. The health care system must change along with the educational system.

From 1^st of July this year will begin to be implemented a system of compulsory social health insurance based on joint and several liability of the state, employers and citizens. The effectiveness of this system is proven by world practice.

Medical insurance system participants will be provided a wide range of medical services. Participation in it socially vulnerable groups will be supported by the state.
The Government needs to provide the necessary health informatics. The system of compulsory health insurance should provide equal conditions for the development of competitive private health institutions.

I instruct the Government and Akims to conduct a broad awareness-raising campaign.

It is also necessary to introduce legislation regulating the prices of all drugs.

Third. In the field of social security.

On my instructions, on 1^st of  July 2017 will be increased pensions for 2.1 million pensioners up to 20% compared to 2016.

In addition, on 1^st of July 2018 the calculation of the basic pension will be based on the new methodology. Its size will depend on the length of participation in the pension system.

All of these measures in 2018 will provide an increase of 1.8 times the size of the new basic pension as compared to 2017.

About 400 thousand children are born annually in the country, which is higher than 1999 level by almost two times. This should be a good trend and continue to support.
On my instructions, the size of a lump sum maternity payment at birth will increase by 20% from 1^st of July 2017.

We should also review the cost of living. It must match the actual consumer spending of Kazakhstan. This will allow to raise from 1^st of January 2018 to increase for 3 million people the size of the basic pension benefits for people with disabilities, families, survivors, targeted assistance and benefits for disabled children.

From 1^st of January 2018, it is necessary to raise the threshold for providing targeted social assistance from 40 to 50% of the subsistence minimum and implement its new format. At the same time all those who can work should be supported only on the condition of participation in the employment program.

The fifth priority – is institutional change, security and the fight against corruption.

First. As part of the third modernization the Government needs to ensure the work on the implementation of OECD best practices and recommendations.

Second. We carry out reforms aimed at protecting private property, the rule of law and equality before the law. It is necessary to continue this work.

I instruct the Government together with NCE "Atameken" and civil society to conduct an audit of all legislation to strengthen protection of property rights.

It is also necessary to humanize the administrative and criminal law. Administrative fines should be fair and proportionate to the committed offense.

It is necessary to carry out further work to reduce the penalties for offenses in the sphere of business. It is necessary to decriminalize economic compositions with a low degree of public danger.

It is necessary to achieve greater trust to the judicial system. It is important to avoid any undue influence on the work of judges.

Third. Security status becomes the measure of a strong and capable state.
In modern conditions the humanity is faced with an increase in terrorism. The key here is the fight against the financing of destructive forces and links with foreign terrorist organizations.

It is necessary to conduct work on the prevention of religious extremism propaganda, including on the Internet and social networks. It is necessary to form a society of zero tolerance for any action related to radical manifestations, especially in the sphere of religious relations.
The purposeful work of theological rehabilitation services should be organized for convicted people in prisons. It is necessary to take additional steps to spiritual and moral education of the younger generation.

Non-governmental sector and religious associations should be actively connected to this activity.
All these measures should be taken into account in the developed on my behalf State Program on combating religious extremism and terrorism in the years 2017-2020.
The fight against cybercrime is becoming quite acute as well.

I instruct the Government and the National Security Committee to take action to create a system "Cyber Shield Kazakhstan".

Fourth. We have made significant steps to reduce the level of corruption in the country. At the same time, the main focus is aimed at combating the effects of corruption.
It is necessary to intensify efforts to identify and to eliminate the causes of corruption.

One key issues is the improvement of the procurement sector.
I instruct the Government to introduce a unified public procurement system on the principle of centralized services.

It is necessary to reconsider radically the approaches for conducting procurement in the quasi-public sector, natural monopolies and subsoil sector.

Much in the fight against corruption will depend on the active participation of the whole society. With the development of social networks and other media assets universal acceptance should be a powerful tool in combating corruption.

Dear people of Kazakhstan!

Through this Address, I would like to convey to every citizen my vision of development trends in the new reality.

I instruct the Government to develop a strategic plan for development until 2025 for the third modernization of the country under the name "National Technology Initiative of Kazakhstan".
We have no other choice but to accept the challenge worthy of the time and solve the problem for the further modernization of the country.

I believe that our great nation will fully take advantage of the unique historical chance.

Dear friends!

Kazakhstan – is a young multi-ethnic, confident in its future, dynamically developing country! We have passed the 25-year-old path of development. In the next 25 years we expect even higher frontiers.
By bringing a unique wealth of experience in the creation of the state, we have entered a new stage. I am sure that whatever difficulties are ahead of us, we will overcome them. Our main strength - is unity.

We will turn Kazakhstan into a more prosperous country for our descendants!

Source: akorda.kz