Business environment in #Kazakhstan continues to attract EU investment

The growing importance of Central Asia as a major trading region for the EU is confirmed by the level of growth seen in the bi-lateral trade between the EU and Kazakhstan.

Over one third of Kazakhstan's external trade is now with the EU, amounting to €22.7 billion in 2018. Almost 60% of foreign direct investment (FDI) comes from the EU, and FDI is growing exponentially.

In January of this year ‘Kazakh Invest’, which provides support services to investors, and which also acts as negotiator on behalf of the Kazakh government, reported 157 projects in the pipeline totalling €34.88 billion. The range of sectors opening up to foreign investment is also growing rapidly as FDI is no longer concentrated in the country’s minerals and raw materials sector, although these remain highly attractive - the World Bank estimates that there are over 5,000 unexplored deposits of mineral reserves still present in Kazakhstan valued at more than €40 trillion - and investors can currently engage in any and all types of business activity.

Kazakh Invest’s Deputy Chairman of the Board Marat Birimzhan, speaking to the Astana Times, identified the country’s agriculture, transportation and logistics as having particular potential and being highly attractive for investors.

The country has 11 Special Economic Zones (SEZs), where investors are exempt from corporate tax, as well as land and property taxes. Goods sold in any of the SEZs are exempt from VAT, and also from customs duties.

The site of the internationally acclaimed EXPO 2017 is now home to the Astana International Financial Centre (AIFC), which under the governorship of former Vice Prime Minister Kairat Kelimbetov has positioned itself as a financial hub for the countries of Central Asia, the Caucasus, Eurasian Economic Union (EAEU), Middle East, Western China, Mongolia and Europe. The AIFC is partnered with NASDAQ and the Shanghai Stock Exchange, is regulated by the Astana Financial Services Authority (AFSA), and operates under its own legal system based on the principles and rules of English law. Indeed, the English language is now firmly embedded in Kazakhstan’s legal and commercial professions, and is taught to all students from primary school onwards.

The AIFC is key to Kazakh President Nursultan Nazarbayev’s “100 Concrete Steps” national plan to implement institutional reforms, designed to provide a strong platform needed to achieve the country’s ambition of joining the top 30 developed countries by 2050. Evidence appears to confirm that the country is well on track to achieve this lofty goal.

Kazakhstan has jumped from last year’s 36th place to 28th in the 2019 World Bank Doing Business Report, the 16th in a series of annual reports investigating the regulations that influence domestic firms’ activities in 190 countries.

In the Ease of Doing Business score, the country ranked higher in enforcing contracts, starting businesses, trading across borders, enforcing contracts dealing with construction permits, getting credit and resolving insolvency.

Kazakhstan shifted from 41st to 36th place in ease of starting new businesses, having simplified the process by eliminating post-registration procedures such as tax registration, social security registra-tion and licensing, thus reducing the time needed to start a new business from nine to five days.

In addition, the nation moved from 123rd to 102nd place in international trade, having introduced the ASTANA-1 IS electronic customs declaration system and trimmed customs administrative fees, whilst also reducing the time and costs of border and documentary compliance for export.

The European Business Association of Kazakhstan (EUROBAK) is a non-commercial organisation representing the European business community in Kazakhstan, formed upon the joint initiative of EU companies operating in Kazakhstan, along with the Delegation of the EU to the country. It plays a major role in promoting and nurturing relateionships between Kazakhstan and the EU member states. Major EU companies active in Kazakhstan include British Gas, Royal Dutch Shell, and Total, and the rapid industrialisation of the economy has created a substantial market for European steel.

Europe for its part imports 60% of Kazakhstan’s oil production. “The relationship between Kazakh-stan and Europe is a natural match because Europe is resource short and Kazakhstan has mas-sive natural resources in energy and raw materials such as copper and rare earths – and these are exactly the areas that the Europeans need most,” Martin Hutchinson, a financial columnist for Reu-ter’s Breaking News and an expert on emerging markets told Kazakh news media EdgeKZ. “Euro-peans also want to diversify so they are not totally dependent on Russia for their natural gas im-ports, and although Kazakhstan is a close trading partner of Russia, it will be a welcome additional source of gas and other resources.”

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