Kazakhstan Chamber of Commerce in the USA

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Kazakhstan’s economic and investment policy

Posted on November 19, 2011 by Alex

Kazakhstan was listed in the top 10 countries for creating a favorable environment for entrepreneurship

The Government of Kazakhstan continues  to pursue its economic priorities under its  2030 Strategy and 2020 Strategic Development Plan. The outcome of the presidential elections last April provided a powerful impetus to deepen the ongoing reforms, enhance the Government’s institutional support for entrepreneurship and increase its efficiency.

In recent years, much has been done to create a favorable business climate in Kazakhstan. Today, the number of active small and medium-sized businesses exceeds 675,000, accounting for one-third of the GDP and providing jobs for more than 25 percent of Kazakh citizens. Even during the time of the worldwide financial crisis, the Government did not ignore domestic entrepreneurs, developing various tools of business stimulus, while the legal framework for business support is being improved all the time.

Roadmap 2020, a large-scale initiative to spur entrepreneurship in modern Kazakhstan, has been implemented since 2010. In 2011, under the program, a credit portfolio of domestic entrepreneurs will to be subsidized to the tune of $2.5 billion.

With the operation of the Customs Union, extensive opportunities have opened for entrepreneurship. In 2010, bilateral trade with Russia increased by 27.2 percent, while trade with Belarus rose by 55.8 percent. Further increases are expected once internal borders are eliminated within the Union and progress is made in setting up a Single Economic Space.

Kazakhstan aspires to become a trade, logistical and business hub for Central Asia. All these efforts come under one strategic task set forward by the President. His goal: to raise Kazakhstan’s GDP per capita to $15,000 and make it a high-income country.     Such a task foresees seven percent economic growth over the mid-term, mostly through processing industries. This means that investments to fixed capital during the next five years will have to rise by at least 50 percent.

The Government of Kazakhstan pursues a favorable investment climate, maximum openness and stability. Major joint projects have been launched with leading foreign companies, with the level of foreign investment reaching $130 billion since 1993.

A large portion of foreign investment, about 33 percent, goes to the mining industry, mainly concerning oil and gas. From 1993 to 2010, inward manufacturing investment amounted to $12.5 billion, or about 10 percent of the total.

Kazakhstan has adopted the five-year State Program for Accelerated Industrial-Innovative Development, which is aimed at shifting investors’ focus from extractive industries toward the establishment of export-oriented and high-tech and innovative industries.

The program is designed to ensure industrial growth through the implementation of 469 large investment projects and the opening new production facilities.  The estimated total of direct expenditure for investment projects under the Industrialization Program is in excess of $40 billion.

Of particular importance is the implementation of niche projects for manufacturing products that are not yet produced in Kazakhstan – investors who are interested in these industries and in such projects  will be specially supported by the Government of Kazakhstan.

The establishment of the Customs Union will create a free and unified goods market of 170 million consumers. Within the Union there are additional opportunities for business, including the reduction of transactional costs and transitory expenses, and the release of substantial working capital, which can be used for developmental purposes. Within the framework of the CES, the free movement of goods, investment capital, services and labor will be ensured. Economic integration will facilitate a coordinated macroeconomic policy to enable competition, while streamlining public procurements as well as government subsidies for industry and agriculture. These reforms are all aimed at creating favorable conditions for domestic exporters to access the transport infrastructure of partner countries, thereby reducing transport costs and improving competitiveness of Kazakh products both inside and beyond CES markets.

The Customs Union and CES are designed to establish favorable conditions and encourage the development of new industries. It is designed to expand to include other states in the region and, if conditions warrant, even to establish a monetary union with a common currency. The Kazakhstan Government pursues a pro-business, yet equitable and predictable, corporate tax policy that  allows businesses sufficient income for further growth and development while meeting the needs of our social policy.

In light of the current economic situation, further gradual reductions are planned. The Government has also been taking significant steps to combat corruption and form an adequate legislative framework to meet the contemporary demands of free-market entrepreneurship.

These reforms have brought about results. According to the World Bank’s Doing Business 2011 report (see page 26), Kazakhstan was listed in the top 10 countries for creating a favorable environment for entrepreneurship.

Further reforms and measures aim to improve the business climate in Kazakhstan. The focus will be made on reducing administrative barriers and completing reform of the legal system. Kazakhstan also plans to improve its economic attractiveness by prioritizing much-needed infrastructure investment projects. In the transportation sector, these include: the modernization of airports in Semey and Ust-Kamenogorsk; the construction of modern port facilities in the Shulbinsk gateway; highway reconstruction and expansion; and several major railway projects.

Another massive, but necessary, investment is needed in the country’s electrical power grid. Modernization, renovation and construction of new generating capacity will require more than $5 billion by 2014 – more than $1.7 billion of that co-financed from the public budget. The development of ‘green’ energy projects is also of particular interest, with a plan to boost electricity production from renewable resources. In total, more than $7 billion will be invested in the electric power industry in the medium term.

These much-needed infrastructure investments will help speed Kazakhstan’s overall development, trade integration and position our nation for further growth in the global economy of the 21st century.

SOURCE: Invest in Kazakhstan, 2011, p. 28-29

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