EMBASSY OF THE REPUBLIC OF KAZAKHSTAN

TO THE UNITED STATES OF AMERICA

KAZAKHSTAN:
New Opportunities
for Business
 Did You Know That
Kazakhstan… ? логотип
 has some 3% of the world’s raw  has oil reserves per capita which are 5  has tripled its oil production since
materials and natural resource base of times as high as in Russia and higher than 1990
over $300,000 per capita (among the in Iran
highest in the world, twice the level of
Russia, higher than Australia)

 more than tripled its gas production  mined around 25% of the world’s  produced 20 mln tones of grain in
from 12 bln. m³ in 2000 to 39 bln. m³ in uranium in 2009, making it the world’s 2009 which made country the 6th largest
2009 largest producer producer and the 7th largest exporter of
grain worldwide

 has 4% of the global iron reserves
 saw $50 bln of FDI over 1998-2008,
more than the $43 bln invested in Russia
 has 8% of the world’s total zinc  has 4% of the world’s total chrome
reserves reserves accounting 15% of global
production
 according to WB data, has $11,526 per  has made major strides in the last
capita GDP and $5,021 per capita FDI (a couple of years in the Transparency
level comparable with Central Europe) International ratings, moving 30 places up
the ranks

 according to Doing Business 2011,  according to Britain-based Legatum  Kazakhstan is 8th for the number of
among the world's economies Kazakhstan Institute, Kazakhstan is 42nd in education doctors, nurses and hospital beds
improved business regulation the most and 16th for the average workers available per capita, and 97% of the
in the past year. As a result, it moved up acquiring secondary education. Literacy population has access to adequate
15 places in the rankings on the ease of rate is 99.7%. sanitation systems.
doing business -to 59 among 183
economies.

2
 Kazakhstan: Economy Overview
логотип

 Significant achievements due to economic reforms, political stability and natural resources
• GDP in 2009 reached $115.3 billion USD
• Many economists expected crisis-hit Kazakhstan's economy to shrink, but, on the contrary, the country
demonstrated seemingly small growth in 2009 (1.2%) and stable 4.7% growth in the 1st half of 2010, which is
considered as a great success, as most of the CIS countries have experienced a decrease in their GDPs.
 Stable, focused and forward-looking government policy
• Kazakhstan is committing significant effort to diversify its economy
• Kazakhstan strives to increase transparency in business practices

Macroeconomic indicators* 2003 2004 2005 2006 2007 2008 2009 2010

Nominal GDP ($ bn) 30.8 43.2 57.1 81.0 104.9 133.4 115.3 1H62.9
Real GDP growth (%) 9.8 9.6 9.7 10.7 8.9 3.3 1.2 8.0
GDP per capita (current $ at PPP) ** 6,808 7,742 8,699 9,839 10,895 11,353 11,526 11,313 (F)
Consumer price inflation (end-period, %) 6.8 6.7 7.5 8.4 18.8 9.5 6.2 7.3**
Recorded unemployment (average, %) 8.8 8.4 8.1 7.8 7.3 6.6 6.7 5.9
Current account balance ($ mln) -273 335 -1,056 -1,999 -8,321 6,279 -4,248 4,923
Trade balance ($ bln) 3,6 6,7 10,3 14,6 15,1 33,5 15,2 16,5
External debt ($ bln) 22.7 32.8 43.4 74.0 96.9 107.7 113.2 114.6
Foreign direct investments, net ($ mln) 2,213 5,436 2,117 6,663 7,966 14,783 10,501 6,353

* sources: National Bank, Ministry of Economic Development and Trade

** source: World Bank
*** as of January-September 2010
3
The Global Financial Crisis and
Kazakhstan
логотип

Impact of the global financial crisis on the Kazakhstan’s economy:

In September 2007, Kazakhstan fully experienced the impact of the world crisis,
mostly in the following sectors of economy:
 Financial sector
 Small and middle-sized business
 Housing construction
 Agro-industrial sector
…as a consequence, all branches of the economy were affected
Government’s response:
 In autumn 2007, the Government promptly developed the Plan of
Antirecessionary Measures for 2007-2008 and began its immediate
implementation.
 In autumn 2008, the Government approved Anti-Crisis Program with a focus
on five vectors: financial sector, real estate market, support to SME,
agriculture sector and innovation-driven industrial projects.
 Total value of the stimulus programs - $20 bln (14% of the country’s GDP).

4
Results of the restructuring
from macro-point of view логотип

Indicator 01.10.2008 01.10.2010

Inflation (y-o-y) 18.2% 6.7%
Banks’ liquidity
(% of total assets) 14.1% 22.6%
Volume of banks’
assets in NB 9.1 USD bln 10.5 USD bln
Banking system
gross external debt 41.6 USD bln 17 USD bln
In addition, the banking system of Kazakhstan has showed its solvency; and
the three problematic banks have successfully finished their restructuring.

5
Key Outcomes of the Anti-Crisis
Package логотип

Significant growth of economic indicators was realized during the 1st half of 2010 in
several industries:

Industrial production 11.0 % Foreign trade turnover 40.1%

Crude oil production 5.9 % Export 72.2%

Natural gas production 5.1 % Cargo turnover 10.4%

Coal production 6.0 % Passenger traffic 10.8 %

Iron production 25.0% Communication services 4.9 %

Processing industry 19.4 % Retail sales 13.3%

Agriculture 1.3 % Wholesale turnover 13.5%

Mining 5.8% Construction works 0.1%

6
 Diversification of Economy
логотип

Kazakhstan aims to achieve sustainable and balanced development of its economy in the next
10 years through :
 diversification and enhancing its competitiveness
 advancing social effectiveness of priority sectors
 implementing investment projects which create a favorable environment for industrialization
 building up centers of economic growth on the basis of rational territorial organization
 ensuring effective interaction between government and business
Primary Goals of the Program of Accelerated Industrial-Innovative Development (AIID)
for 2010-2014:
 GDP growth by 50% from the level of 2008
 Labor productivity increase in manufacturing industry by 50 % and in separate sectors by 100 %
 Increase proportion of non-oil and gas exports by 40%
 Reduction of energy intensity of GDP no less than 10% from the level of 2008
 Increase of active enterprises up to 10 % from number of operating enterprises
The key mechanism of the AIID is the Map of Industrialization
 Envisages 101 industrial projects worth 6.8 trillion tenge
 More than 130,000 temporary and 90,000 permanent jobs are expected to be created

7
 Boosted Industrial-Innovative
Development Program 2010-2014
логотип

Agriculture Construction and Refining and O&G

2015 – 8% export share of Construction Materials Infrastructure
agricultural products Development
2015 – 80% of demand
Gross Value Added+16%
by domestic production 2014 – 100% of demand
10000 new jobs by domestic oil products
Gross Value Added+76%
Gross Value Added+30%
Metallurgy Chemical and Energy including
pharmaceutical renewables
2015 – twofold
Industry
production and export 2015 – 10% decrease of
2014 – 50% of demand economy’s energy
Gross Value
by domestic production intensity
Added+107%
Transport and
Telecommunications
Total Gross Value Added+over KZT 7 trn. ($47.6
boost for new bln.)
production across all
134 projects are scheduled for 2010-2011
sectors
Gross Value Added+63% 2011-2014 are still ahead

8
 State support of investment
логотип

Investment tax a) Corporate income tax up to 10 years;

preferences b) Property tax up to 5 years;
c) Land tax up to 5 years.
preferences
Investment

Custom duty
Can be granted when investor imports equipment or
exemption
parts to implement the investment project

Can be granted as a plot of land, building, construction,

State grants in machines and equipment and so on. Maximum volume
kind of state grants in kind should not exceed more than 30%
of investments in fixed assets.

9
 Special economic zones
operating in Kazakhstan
логотип

Burabay
Astana – New City
(construction materials,
business)

Atyrau Burabay
(tourism cluster)
Petrochemical Park
(petrochemical industry)

Marine port Aktau

(naval transportation,
marine freight)
Ontustyk IT-Park ‘Alatau’
(textile industry, (hi-tech, software)
agriculture)

Company established in Free economic zone is exempted

not only from paying corporate, land and property taxes
but also from value-added tax.

10
Special Economic Zones
логотип

Members of SEZ enjoy the following privileges:

Corporate income tax exemption;
Taxation rate of less than 0% when calculating ground tax;
Application of the 0% rate to the mid-year cost of taxable objects when calculating property tax;
VAT exemption on goods and services given on SEZ territories, made, or consumed in activities related to
SEZ creation;
VAT exemption on building and civil works for administrative and industrial facilities (offices, industrial
buildings, warehouses) intended for activities related to SEZ creation;
Customs-free policy.
From 2011, SEZ members enjoy extra benefits under the new law “On SEZ”:
VAT at a rate of 0% for goods consumed in activities to be determined by the government;
Exemption for up to 10 years from payment of land tenure in SEZ territory;
Increase from 15% to 40% in the marginal rate of depreciation used for IT software;
Introduction of a special process for importing foreign labor to SEZ territory;
“One-stop shop” service to SEZ members.
For the SEZ “Astana – New City”, an additional benefit will be introduced: 100% exemption from corporate
income tax; for the SEZ “Information Technology Park”: 5-year Social Security tax exemption.

11
Main investors of the Republic of Kazakhstan

(inflow of FDI in 1993 – 1H2010)

логотип

Yes, the US is one of the top

investors to Kazakhstan
12
Structure of gross inflow of FDI
(inflow of FDI in 1993 – 1H2010)
логотип

…but , again, focus is on

extractive sector
13
Customs Union with Russia and
Belarus
логотип

 On November 27, 2009 leaders of Kazakhstan, Russia and Belarus

signed final agreements on the trilateral Customs Union, effective
from January 1st 2010
 Common external tariff between members of Customs Union,
effective from January 1st 2010
 Customs Code of the Customs Union, effective from July 2010.
 Further economic integration process assumes that CU member-
states will reach unified customs territory that will include free
movement of labor and capital, effective as of July 2011.

14
Favorable Tax Legislation
логотип

 Kazakhstan has the most liberal tax regime among the countries of
the Customs Union.

Type of tax Republic of Russian Republic of

Kazakhstan Federation Belarus
Corporate 20% 20% 24%
income tax
Value added 12% 18% 20%
tax

 Corporate tax will be gradually reduced:

 20% - since January 1st , 2009
 17.5% - since January 1st , 2013
 15% - since January 1st , 2014

15
WTO accession remains to be a
priority
логотип

Kazakhstan began the process of accession to the

Entering WTO WTO in January 1996 since the official application
for the accession

WTO and CU negotiations moved in parallel. The

Creation of
pace for creating the CU showed more flexibility
Customs Union from the Governments of Russia and Belarus.

Establishment of CU doesn’t “close WTO doors”. Kazakhstan has continued its

individual track. Negotiations with the United States and European Union are at the
final stage. Negotiations with the US on goods market access have been finalized.

16
 Official Points of Contact
логотип

Ministry of Industry and New Technologies

(www.mit.kz)

‘Samruk-Kazyna’ ‘KazAgro’ Development Bank of National Export and

National Welfare Fund National Holding Kazakhstan Investment Agency
(www.samruk-kazyna.kz) (www. nhkazagro.kz) www.kdb.kz ‘KAZNEX INVEST’
www.kaznex.kz

National Investment Fund Export credit Investment Portal SME

Innovation Fund of Kazakhstan Insurance Corporation ‘Kazinvest’ Development
www.ifk.kz ‘KazExportGarant’ Fund ‘DAMU’
www.nif.kz www.kazinvest.kz
www.kecic.kz www.damu.kz

17
 Samruk-Kazyna
National Welfare Fund
логотип

Established in the midst of the global economic crisis Samruk- Kazyna is aimed to
sustain the development of national economy and stabilization of financial system

Samruk-Kazyna defines strategy for state owned assets and is the main instrument for
implementation of government policies
 Key player of the industrial and innovation development program
 Promotion and implementation of large-scale investment projects in the framework of the
diversification of the economy
 Implementation of effective corporate governance according to the best international
practices in corporate management and financial control
 Effective tool in implementation of the Anti-crisis program:
– primary role in stabilization of financial sector by means of direct participation in 4 largest
commercial banks of the country
– primary role in stabilization of the real estate market
– direct support of the small and medium size businesses
– manages mortgage refinance program

18
Foreign Investors Council
chaired by the President of Kazakhstan
логотип

19
 3 BASIC REASONS TO INVEST, TRADE
AND PRODUCE IN KAZAKHSTAN
логотип

Favorable  Political & social stability

1. Investment  State support and guarantee of

investments (Kazakhstan has signed
Climate agreements on mutual investment protection)

Natural  Large mineral & renewable

2. resources reserves (#1 Uranium Producer in
the world)

 Hub Europe <-> Asia

3. Markets  Large & fast growing neighbor
markets (up to 500 million
consumers)
20
EMBASSY OF THE REPUBLIC OF KAZAKHSTAN
TO THE UNITED STATES OF AMERICA

Thank you for your

attention!

www.kazakhembus.com