By Dr Shahid Qureshi : —
There is no doubt that in today’s complex geopolitical conditions, many Western business representatives are paying more attention to Central Asia and its regional leader – the Republic of Kazakhstan. As a matter of fact the ‘welcoming to all policy’ of President Nursultan Nazarbayev has made him a regional leader who is also playing his role on the international stage. His role in the Ukraine crisis is admired by all the leaders and seen as a peace maker.
The interest in Kazakhstan is growing from year to year. The country managed to remain stable in a complicated region, and demonstrated one important trait – an apt negotiation skill. Surrounded by Russia on one side and China on the other, and with US and EU businesses widely represented, Kazakhstan is perhaps one of the few places where competition for integration has turned into a successful multilateral cooperation. That is what makes Kazakhstan so interesting for business. After all, capital prefers to flow in places offering quiet and stability. This is evidenced by the fact that over the past twenty years Kazakhstan became the most attractive foreign capital destination in the entire CIS region, attracting a total of over $ 200 billion in FDI.
The countries vast commodities reserves attract the greatest investment interest. The republic possesses reserves of almost all types of chemical elements, many of which are already successfully explored and produced.
Nonetheless, today’s dynamic economic structure is changing, and pursuing diversification, the country provides all of the necessary conditions for investment outside the oil and gas and mining sectors. The processing industry presents a number of equally lucrative opportunities for investors. So what does the Kazakhstan do and why is it profitable to invest there?
First of all, the Republic is openly friendly to foreign businesses. In July 2014 the authorities launched a pilot project for a visa-free regime with strategic partnership countries to Astana. The list includes – Commonwealth of Australia, Hungary, Italy, Monaco, Belgium, Spain, the Netherlands, Norway, Sweden, Malaysia, UAE, Singapore, UK, USA, Germany, Finland, France, Switzerland and Japan. With the Republic of Korea it signed an agreement for a mutual 30 days visa-free travel.
Secondly, the country created a favourable institutional environment for business development. The Government of Kazakhstan approved a comprehensive plan to attract direct foreign and domestic investments, providing various tax exemptions.
In his speech to potential investors in Milan, President of Kazakhstan Nursultan Nazarbayev has pointed out 10 special economic zones, providing tax preferences and comprehensive support for entrepreneurs. Investors in SEZ are exempt from corporate income tax and land tax for 10 years, 8 years from property tax, and guaranteed stability of tax legislation. Moreover, the state can compensate up to 30% of the capital costs after priority sectors projects commissioning.
Overall, the Government of Kazakhstan is fully engaged in the pursuit of reforms: creating new incentives, simplifying administrative procedures, developing “Electronic Government”, implementing the “one window” principle for investors, and more. The representatives of foreign business can count on the guaranteed state contracts, and their rights will be fully protected by the investment ombudsman.
One of the new initiatives is the creation of an international financial centre “Astana”, to be launched from January 1, 2016. The “Astana” centre will be based on DIFC model. The centre will cover several areas: the development of the capital market with foreign investments, Islamic finance as an alternative to traditional banking services, and asset management.
The new financial centre will create the most favourable operational conditions (provision of tax and customs benefits, freedom of movement for capital and labour, and so on), and will guarantee investments protection. Any investment disputes will be settled by financial courts run by foreign judges, using the English legal system and language in the proceedings.
In general, Kazakhstan created a successful vertically integrated system to attract foreign capital. The work begins with the front office located abroad. The national agency KAZNEX INVEST then helps connect investors with government agencies, ministries, and national companies. After that potential partners continue to work at the regional level.
All these and other measures helped bring Kazakhstan to the 77 place of the 189 countries in the World Bank’s “Ease of Doing Business 2015” rating. This places Astana ahead of Beijing, which takes only 90th place.
Thirdly, Kazakhstan is gaining foreign businesses interest in other ways too. The country offers its unique geo-strategic location. Five existing international transport corridors pass through the country: the Trans-Asian Railway (TAR) Northern Corridor, TAR Southern Corridor, Central (Central Asian) Corridor, North-South Corridor and TRACECA.
The global integration process, in turn, greatly expands the republic’s market. Successful implementation of the Eurasian project has opened access to a market of more than 170mln people and the combined GDP of more than two trillion US dollars. What began as a customs union, became CES, and today is known as the Eurasian Economic Union.
By the coming December 2015 WTO will complete all the ratification procedures for Kazakhstan’s accession. All of the above indicates that the Kazakhstan’s market is becoming more open and offers great prospects for foreign capital.
(Dr Shahid Qureshi is senior journalist and analyst with BBC based in London)