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Sonalika – Kazakhstan

Country Analysis

In country analysis comprises of Political, Economical and Legal environment along with the
taxes and custom duties involved and Cultural aspects of Kazakhstan.

Political Environment- Kazakhstan has Presidential Republic Political structure. The President
of Kazakhstan is Ms. Nursultan Nazarbayev, who has been in presiding since 1991 when
Kazakhstan got breakup from Soviet Union. Ms. Nursultan Nazarbayev has very strong position
in politics, he got 91% vote in third term in December 2005 and he was reelected. The maximum
term limit for president is 2 to 5 year but it was removed for Ms. Nursultan. The prime minister
of Kazakhstan is Ms. Karim Masimov. He selected as PM in 2007 election. There are six major
parties in Kazakhstan. The Next election will be on 2012 for Presidential and 2011 for
legislative. The corruption index of Kazakhstan was -0.91 in 2007(-2.5worst and + 2.5 best).
This is major concern for Kazakhstan. (Source EDC, 2008).

Economic and Legal Environment

Economic environment of the country plays a vital role to start business in any country.
Kazakhstan is one of the fastest growing countries among CIS countries (Commonwealth of
Independent States). Kazakhstan has fourth position Russia, Ukraine and Uzbekistan.
(Introduction to Kazakhstani Passenger Car Market). Basically Kazakhstan has free trade
economy. Coming to Kazakhstan’s internal condition of economy, Kazakhstan has 60.5% free
economy and it makes 76th position of Kazakhstan in world’s freest economy country. In this
year the overall score of trade freedom increased by 1.4% of Kazakhstan. The table below shows
that how much economical freedom Kazakhstan has in different sector.

Sector Freedom

Business Freedom 56.5%

Trade Freedom 86.2%

Fiscal Freedom 80.1%

Freedom For GOVT 84.7%

Monetary Freedom 71.9%

Investment Freedom 30%

Financial Freedom 60%

Property Freedom 30%

Freedom from Corruption 26%

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Labor Freedom 80%

Source: (Index of Economic Freedom, 2008,)

This table demonstrates the freedom Kazakhstan provides for doing business in the
country. As we know that Kazakhstan is developing country and from last few years the country
is performing well, Although Kazakhstan also facing global economic crisis but they are able to
sustain their growth, because they have good short term policies by which they can manage the
risk (Source- Republic of Kazakhstan, April 30, 2008). The able shows the current economical
condition of Kazakhstan.

GDP( Purchasing power parity) $168billion

GDP (Real growth rate) 8.5%

Labor Force 8.229.million

Inflation Rate 10.8%

Industrial Production Growth Rate 7.2%

Reserve Of Foreign Exchange and Gold 17.63Billion

Currency (code) Tenge(KZT)

Exchange Rate Tenge (KZT)per- US dollar 122.5

(EDC, 2008) and

(Central Intelligence Agency)

Economical Barrier- There are some economical barrier in Kazakhstan which can put effect to
start business in Kazakhstan.

1). Investment freedom.

2). Property Freedom.

3). Freedom from Corruption.

Taxation- Kazakhstan follows the calendar year as tax year. The income tax for corporate is
30%. This 30% is payable for nonresident and resident legal entities. The nonresidential give
15% additional tax on their net profit, but this can be reduce by 5% after proving double tax

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treaties (Legal and Tax aspects of doing business in Kazakhstan, 2008). The Value Added Tax
(VAT) is 12% (Kazakhstan - Market Access). The VAT is charged on imports from non CIS
countries only and they need to sign VAT agreement with CIS countries. Kazakhstan also has
transportation tax for deferent vehicle at present the tax rate on vehicle is 1% to 8%. (Kazakhstan
- Market Access)

Import Regulation- At present some of the products can be imported without license in
Kazakhstan. E.g. medical equipment, Medicines, Petroleum exploitation equipment, chemical
product, waste etc. And minimum time for export is 77days and there are 11 documents required
for this. The cost of import is US $2600 (per container). (Trading Across Borders)

Export Regulation- To export any goods there are 12 documents required and the cost of export
would be US $3000 (per container). The time required for export would be 74 days. (Trading
Across Borders)

Custom Duties- The rate of custom duty is 19% in Kazakhstan and this duty calculated on the
CAF value of goods (transit value, packaging charge, and transport charge). (Kazakhstan -
Market Access)

Excise duties- Excise duty in Kazakhstan is 7% to 100% for deferent products. Product which
come under excise are tobacco, alcohol drink, tourist vehicles, jewels, cloth and etc.(Kazakhstan
- Market Access)

Transportation Tax- The transportation tax in Kazakhstan depends on the capacity, Nature and
Engine capacity of the vehicle. There are different tax criteria for every vehicle. For 2000 cc
Passenger car the transportation tax is 7%. (Legal and Tax aspects of doing business in
Kazakhstan, 2008)

Starting Business in Kazakhstan- To start Business in Kazakhstan there are many legal
prospects which have clear foreign investor. Here the table is presents the cost, document and
time required to start business in Kazakhstan.

Particular Procedures Duration (Days) Cost

Registry Property 9 250 7%(of property value)

Starting Business 4 9 59.5%(GNI per capita

Enforcing Contracts 47 1642 25% (of claim)

(Source: Trading Across Borders)

Labor Force- 8.229 million.(EDC 2008)

Largest Trading Partner- China, Germany, Russia, Italy, France, (EDC, 2008)

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Source of Foreign Exchange- Oil and Gas, Matallic, Minerals.(EDC, 2008)

Culture of Kazakhstan

The Ethnic groups of Kazakhstan are as mentioned in the Table 1 and Religions followed is
mentioned in the Table 2.

Name of the Ethnic Population Religions Population


Percentage Percentage

(As per census


Muslim 47%
of 1999)

Kazakh/Qazaq 53.4%

Russian 30%
Russian Orthodox 44%
Ukrainian 3.7%

Uzbek 2.5%

German 2.4%
Protestant 2%
Tatar 1.7%

Uygur 1.4%

Other 4.9%
Other 7%

Table 1: Ethnic groups of Kazakhstan Table2: Religions Practiced in Kazakhstan

(Central Intelligence Agency)

The state language of the Kazakhstan is Kazakh and 64.4% population speaks where as Russian
is the Official language, used for their business purpose and majority of the population can speak
both the language. Kazakhstan’s society is masculine in nature and they also believe in hierarchy

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and elder people are well respected and they are decision makers or the one with highest position
can also make the decision resulting in the favour of group.

Etiquettes for Business Communication in Kazakhstan

Handshake with two hands is common greeting and has to be gentle and is done when the
meeting ends as well as prior taking leave. Usually men do not prefer to handshake with women
unless and until they extend their hand but also care has to be taken so that they are not felt
insulted if one has to refuse handshake with them. Eye contact has to be maintained while
greeting the people. It is necessary to shake hands every time you meet someone more number of
times in a day. One need to wait till introduced to everyone in a particular order (as per
importance). Someone’s first name should not be used unless and until they are permitted as the
people are addressed with title (academic/professional) first and then Surname.

Professional and academic titles are important in business. Business cards with title are of
extreme importance. It is necessary to print in English language one side and Russian language
in another. It is easy to get an appointment or access with Business cards and is exchanged
without any great efforts.

Meetings

A business meetings style differs in Kazakhstan and depending upon whether government sector
and private sector is involved. Private Sector usually follows western style where as in
government sector meetings protocols are of prime importance and takes lot of time.

As Kazakh society hierarchical in nature people with similar rank prefer to meet for business.
They use tables with T-shape for official meetings and the two parties sit together opposite to
each other with the ranks decreasing in order. The senior most Kazakh introduces team members
in the order of the rank and importance is giving in relationship building before the meeting
begins with the small talk. It is not appropriate to start the business talks unless other party starts
the discussion. Generally the meetings are scheduled with start and end time but they may
prolong as there are speeches involved in the meetings, by the senior most Kazakhs during the
meetings. (Kazakhstan - Language, Culture, Customs and Etiquette, n.d.)

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References

Asia Pacific Country profile: Kazakhstan. (n.d.). Retrieved December 13, 2008, from BBC
News: http://news.bbc.co.uk/2/hi/asia-pacific/country_profiles/1298071.stm

AutoWorld Astana 2007. (n.d.). Retrieved December 05, 2008, from Auto world Astana:
http://www.autoworld.kz/en/2007/index_html/

Central Intelligence Agency. (n.d.). Retrieved December 10, 2008, from World Fact Book -
Kazakhstan: https://www.cia.gov/library/publications/the-world-factbook/geos/kz.html

Daly, J. C. (2008, March). Kazakhstan’s Emerging Middle Class. Retrieved from


http://www.silkroadstudies.org/new/docs/Silkroadpapers/0803Daly.PDF

EDC. (2008, September). Retreived from http://www.edc.ca/english/docs/gkazakhstan_e.pdf

Global Presence. (n.d.). Retrieved November 28, 2008, from Sonalika:


http://www.sonalika.com/market.aspx?id=mkt

Group Companies. (n.d.). Retrieved November 28, 2008, from


http://www.sonalika.com/icml.aspx?id=icml

Heritage. (n.d.). Retrieved Novemer 28, 2008, from http://www.sonalika.com/history.aspx?


id=history

Index of Economic Freedom, 2008. (2008). Retrieved December 07, 2008, from The Heritage
Foundation: http://www.heritage.org/Index/country.cfm?id=Kazakhstan

Introduction to Kazakhstani Passenger Car Market. (n.d.). Retrieved December 02, 2008, from
globis berlin: http://www.globis-
berlin.de/de/Marktforschung/Studien_und_Reports/Automotive_Research_Reports/Kazakhstani_
Automotive_Market/index_html

Kazakhstan - Language, Culture, Customs and Etiquette. (n.d.). Retrieved December 07, 2008,
from Kwintessential Cross Cultural Solutions: http://www.kwintessential.co.uk/resources/global-
etiquette/kazakhstan.html

Kazakhstan - Market Access. (n.d.). Retrieved December 06, 2008, from Federation of
International Trade Association: http://fita.org/countries/kazak.html

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Latest News - New Automotive Market Report Kazakhstan: Opportunities in Kazakhstani Car
Market and Aftermarket. (2008, September 24). Retrieved December 09, 2008, from PRLog Free
Press Releases: http://www.prlog.org/10121117-new-automotive-market-report-kazakhstan-
opportunities-in-kazakhstani-car-market-and-aftermarket.html

Legal and Tax aspects of doing business in Kazakhstan. (2008, January) Retrived form
http://www.cabc-global.com/uploads/Legal%20and%20Tax%20Aspects%20of%20doing
%20business%20in%20Kazakhstan%202008.pdf

Parshina, O. (2008, April). Kazakhstan: Car Market Overview. Retrieved from


www.buyusa.gov/auto/kazakhstan.pdf

Trading Across Borders. (n.d.). Retrieved December 10, 2008, from doingbusiness:
http://www.doingbusiness.org/ExploreTopics/TradingAcrossBorders/

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