Kaznex Invest was established as an Investment Promotion Agency in 2010. There are now over 180 of such agencies worldwide, all of which are aimed at promoting foreign direct investment into the country. With the government’s launch of the Industrialization Program in 2010, Kaznex Invest has become the investment hub, promoting benefits of investing in Kazakhstan. As a new agency, it has kept busy by travelling to many countries worldwide and delivering the message to potential investors that Kazakhstan is a safe, successful, stand-alone country. According to the World Bank’s Doing Business 2015 the country is currently one of the best in the region in terms of doing business.
Kaznex has also been establishing relationships with multinational companies from around the world in order to develop partnerships and promote investment opportunities in Kazakhstan. There are many tools that Kaznex has been using to encourage investment. One of those tools is the “Investment Incentives Package’. This new package of incentives, passed back in June this year, provides unprecedented support to investors. When the investors invest money into building a production facility, the government reimburses 30 percent of all the capital expenses once it is finished. Deputy Chairman of Kaznex Invest, Mr. Kairat Karmanov, explains “No where in the region can you find 30% cashback for the capital expenses of potential investors.” After hearing complaints about visa regime in Kazakhstan, the goal was to ease the way of doing business in Kazakhstan. In order to make this happen, the government waived the visa regime for 10 countries that have been the biggest investors to date. If the citizens of these countries decided to start their business in Kazakhstan, they would be given an “investors visa”, which is a permanent visa for 3 years. Another issue was in regards to the restrictive nature of the local content in Kazakhstan. The government had been very protective when it came to the local labor force and was restricting the import of highly qualified workforce from abroad. This issue has also been resolved for the priority industries of Kazakhstan. Now, they no longer require a work permit, if you are an investor who wants to import labor from anywhere in the world. “This is unseen for any other countries in the region”, explains Mr. Karmanov. In relation to taxes, Kazakhstan has one of the most attractive tax regimes in the region. As of earlier this year, a corporate tax has been waived for up to 10 years for priority industries. Property and land taxes have also been waived for up to 8 and 10 years respectively.
With the goal of diversifying the economy in Kazakhstan, the government has identified 6 priority industries: metallurgical complex, oil refining, food processing, production of construction materials, machine building, and chemical industry. The reason these measures of support only apply to these industries is in an effort to shift away from the dependency on the energy sector. “Given the oil prices dropping, launching the Industrialization Program back in 2010 was a smart move” adds Mr. Karmanov.
The main role of Kaznex Invest is to improve the investment climate in Kazakhstan by assisting potential investors through the entire cycle. This begins with pre-investment stage, where potential investors are invited to the country and introduced to government officials and key decision makers from private and public sector, in order to let them see and experience the environment in Kazakhstan. Mr. Karmanov points out, “Many of them don’t expect to see such a modern, 21st century city as Astana. They are often amazed with the pace of construction and with the speed of change in this part of the world. Astana is essentially the showcase for Kazakhstan.”
In the following stage, the investment cycle, Kaznex organizes various meetings for potential investors. Through these meetings, they are able to identify what they actually want to do in Kazakhstan, what areas could be of interest, and what the demand is. “Depending on their area of specialization, they start asking us to organize certain meetings for them.” Kaznex arranges a clear program in order to have them meet the right people and have a packed, productive couple of days while they are visiting the country. If and when they return to Kazakhstan and decide they want to invest, Kaznex then prepares the final agreement, which indicates all of the obligations on behalf of both parties. Once this kind of agreement comes into place, both parties have to strictly follow their obligations. However this agreement does not mark the end of cycle. Should there be any issues following this agreement in regards to rules and regulations or local authorities, Kaznex also provides post-investment support in order to facilitate these misunderstandings. Mr. Karmanov points out, “Problems can arise anywhere in the world however we make sure we always take care of these problems for our investors.” Post investment support is a final stage and completes full cycle.
Currently, the majority of foreign investors to Kazakhstan are countries that have had waived visas. The number one partner has been Netherlands, followed by countries like the US, more recently China, Switzerland and France. “Countries like the UK, Italy, South Korea, Malaysia and United Arab Emirates are expressing more and more interest”, adds Mr. Karmanov. In terms of export partners, Italy has been the main export trade partner, followed by China, Netherlands, France and Russia. Being a landlocked country, however,the logistics of Kazakhstan are quite complex and it is very difficult to export worldwide as it is so far away from the oceans. For this reason, there have been a lot of investments made in road infrastructure in order to facilitate this. Kazakhstan is currently completing a project that will include a new railway running from Kazakhstan to Southern Iran through Turkmenistan. This new route will allow export increase of Kazakh goods to the Gulf countries. There have also been investments made in terminals abroad, which include a seaport long-term lease on the East coast of China. “We have gained a “green route” from this seaport, via China, all the way to Kazakhstan. This means a free access to Chinese infrastructure, which will allow Kazakhstan to deliver goods to the Pacific Ocean”, explains Mr. Karmanov. In addition to this, partner relationship with Russia has facilitated exports of goods from Kazakhstan to Europe by all means of transportation. Thus, Kazakhstan ensured export routes three ways: to Europe via Russia, to Pacifics via China, and to the Gulf countries via Iran.
Next to oil and gas, the most significant exports in Kazakhstan have been metals and agricultural products. However, the variety of exports (including finished goods) is continuing to increase, from products like car batteries, automobiles, diesel and electrical locomotives to transformers and construction materials, from oil & gas equipment, motor oil, chemical products to clothing, from medical equipment, pharmaceutics to chocolates and home appliances. Mr. Karmanov points out, “Although at this point the share of finished products is not as significant in total amount of exports, however, in the next 5-10 years, more and more finished products will be hopefully seen on the shelves of the stores of the surrounding markets.”
In regards to the upcoming EXPO in 2017, Kaznex plans to use this opportunity to promote foreign investment by setting up a number of investment related events and activities. “A major event such as EXPO provides a great platform where one can promote and facilitate investment. This is a great chance to put Astana on the world map”.
Kazakhstan has been blessed with an abundance of natural resources, but the importance of diversifying the economy continues to grow. “We don’t want to be associated only with oil and gas. We would like to start developing agribusiness as well”, adds Mr. Karmanov. In a study conducted by the World Bank, Kazakhstan alone can feed up to 1 billion people. This presents a great opportunity for investment as it is predicted that the world will face a serious food security problem by 2050.
Despite not having the biggest population in the region, Kazakhstan has access to a greater market and is the country with the best investment climate. The measures undertaken by the government have put Kazakhstan on top. “If you take a look at the surrounding area, including Russia, Iran, China, and all the other ‘stans’, it is a quite large region with approximately 500 million consumers. Saying that Kazakhstan currently has best investment climate is not an exaggeration but a true fact. Once you come see Kazakhstan you will truly be amazed by what you see” concludes Mr. Karmanov.