2017 Guide to Doing Business in Kazakhstan

A G U I D E T O

K A Z A K H S TA NFOR AMERICAN BUSINESSES

2017

WASHINGTON, DC

ZaysanAyagoz

Lepsi

PanfilovQapshaghay

ShuZhangatas

Saryshaghan

Balqash

Temirtau

AtbasarEsil

Rudnyy

Ekibastuz

Turkistan

Orsk

Aral

Leninsk

Shalqar

Embi

Beyneu

Aqsay

Shymkent

Zhambyl

Taldygorghan

Oskemen

Oaraghandy

Koksnetau

Petropavl

Qostanay

Arqalyq

Zhezqazghan

Qyzylorda

Aqtobe

Oral

Aqtau

Pavlodar

For more information on investing or doing business in Kazakhstan, visit www.trevianinternational.com

Astana

Atyrau

Almaty

K A Z A K H S T A NF O R A M E R I C A N B U S I N E S S E S

A N I N T R O D U C T I O N T O

A G U I D E T O

K A Z A K H S T A NFOR AMERICAN BUSINESSES

2017

2017 GUIDE TO KAZAKHSTAN FOR AMERICAN BUSINESSES 2017 GUIDE TO KAZAKHSTAN FOR AMERICAN BUSINESSES

5

AN INTRODUCTION

TO K A Z A K H S TA NPolitics & Government

The Republic of Kazakhstan declared sovereignty from the Soviet Union in October of 1990. It followed that by declaring independence in December 1991, doing so in anticipation of the Soviet Union’s imminent collapse. Kazakhstan was the last republic of the USSR to declare its independence, created as a republic with an executive, legislative, and judicial branch, Kazakhstan passed its first constitution as an independent nation in January 1993. The second—and currently effective—constitution was passed in August 1995. Almaty, the largest city in Kazakhstan, was the country’s original capital, although the capital was moved to the north-central city of Astana in December 1997.

Kazakhstan abides by a presidential system of government, whereby the president is head of state and leads the executive branch. The Kazakh system allows presidents to serve five year terms in office, after which there must be an election. See the section “Key Leadership” of the current President Nursultan Nazarbayev.

Kazakhstan’s constitution gives the president a wide range of powers, including the title of Commander in Chief of the armed forces. The president also chooses the cabinet, known as the Council of Ministers, and chooses both the Prime Minister and Deputy Prime Minister, who can be dismissed by the president with the consent of Parliament. Yet for all the influence of presidential authority, the authority of the executive branch is in the hands of Kazakhstan’s people, as the Constitution of the Republic of Kazakhstan declares the people to be the only source of state power.

7AN INTRODUCTION TO KAZAKHSTAN


Prime Minister Bakhytzhan Sagintayev is the head of government in Kazakhstan. Parliament is bicameral—the upper branch is the Senate, which consists of 47 members, 15 of whom are chosen by the president. The other 32 come from Kazakhstan’s 14 regions, as well as two each from the cities of Astana and Almaty. Each senator serves a six-year term. The lower branch is called the Mazhilis, and it consists of 107 members who each serve five year terms. Ninety-eight representatives are elected based on proportional representation, and the other nine are chosen by the Assembly of Peoples of Kazakhstan. Parliament can take legislative initiative, although laws with budgetary implications must be approved by the government. Proposed laws that originate in the parliament must be approved to two-thirds of the Mazhilis before they move to the Senate, where they must be approved by two-thirds of the upper chamber to go to the president for a signature. Should the president veto a parliamentary initiative, it will return to the Mazhilis for another vote that must receive more than two-thirds approval before going back through the Senate. Parliament is ultimately responsible for passing constitutional amendments and other legislation. Regional electoral bodies call Maslikhats exist to represent the local interests of Kazakhstan’s fourteen regions. Members of the Maslikhats are elected to two year terms through direct elections.

The Assembly of People of Kazakhstan was created in March 1995 in order to “ensure socio-political stability” and to guarantee the rights and freedoms of all ethnicities within Kazakhstani civil society. The APK holds the important duty of selecting the 9 members of the Mazhilis who represent Kazakhstan’s ethnic groups and the interests of the APK’s other 373 members. The Assembly can also call for new elections, and did so in 2015, sensing that President Nazarbayev would need a new electoral mandate to implement his dramatic plans for Kazakhstan’s financial and renewable energy modernization. APK is also cultural body that includes a Scientific-Expert Council, and Club of Journalists, and Association of Entrepreneurs, and a public fund for language learning. President Nazarbayev serves as the Chairman of the APK.

The judicial system in Kazakhstan is exercised by the Supreme Court. Below the Supreme Court are the Appellate courts, the specialized district courts and other district courts. The Constitutional Council is a judicial body separate from the Supreme Court system that can review laws, hold court on national referendums, and ensure international treaties comply with the language of the Constitution

77

The Assembly of People of Kazakhstan was created in March 1995 in order to “ensure socio-political stability” and to guarantee the rights and freedoms of all ethnicities within Kazakhstani civil society.


9

D e mo g r a p h i c sof Kazakhstan Today

Human Rights & Democratization

Kazakhstan’s culture and demographics are dynamic, hosting many languages and ethnic backgrounds. Of the roughly 17.7 million people living in Kazakhstan, 66% are ethnic Kazakhs. Russians make up 21% of the population, Uzbeks 3%, Ukrainians 1.7%, Uighurs 1.44%, and Tatars 1.17%; however, in total there are more than 140 ethnic groups in Kazakhstan. Islam is the majority religious group, comprising 70% of the population, while (primarily Orthodox) Christians form over a quarter, and other religions combined are just over 3%. Kazakhstan is also remarkable for its adult literacy rate, which stands at 99.7%; and a relatively low Gini index score for inequality of wealth distribution.

Kazakhstan has taken concentrated steps to improve its human rights record, while acknowledging that the work is not finished. In 2002 Kazakhstan created the Commissioner for Human Rights in the Republic of Kazakhstan, who serves as a human rights Ombudsman. This office investigates potential human rights issues and brings Kazakhstan’s human rights practices into accordance with the UN Human Rights Commission of 1991. Kazakhstan has also undertaken a number of multilateral human rights initiatives, partnering with, among others, the OSCE and the UN Children’s Fund. President Nazarbayev announced in 2009 the national Human Rights Action Plan as part of Kazakhstan’s assumption of the chairmanship of the OSCE, and three years later Kazakhstan was elected to the Human Rights Council of the UN.

In 2015 the government of Kazakhstan began to expand the rights and powers of local governments throughout the country in the second stage of its 2013-2020 local governance strategy. Measures adopted in March 2015 granted local authorities greater financial powers and gave local populations more involvement in decision-making processes. The local governance strategy also granted more budgetary powers, and placed revenues from taxes on government property and street advertising, as well as taxes on transportation and small businesses, into the hands of local government. In November 2015 a new law gave local authorities the power to set up public councils to enhance public oversight of local government operations.

KAZAKHSTAN TODAY


11

Domestic Stability

Kazakhstan has long been known as the most politically and economically stable country in Central Asia and the Commonwealth of Independent Nations. President of Kazakhstan Nursultan Nazarbayev has close relations with Russia, China, Europe, and the United States. Politically, Kazakhstan is as stable as it has ever been. In April 2015 Nazarbayev was reelected with 97.7% of the vote, and he enjoys a high level of popularity domestically. Kazakhstan has shown positive economic growth in the past two decades, and though the commodities crisis has slowed that growth somewhat, Kazakhstan is widely considered the most open Central Asian country with the most economic opportunity. To guarantee the stability and long-term attractiveness of its financial system, Kazakhstan floated its domestic currency in August 2015. Kazakhstan’s macroeconomic environment is also one of the most stable in the world. The World Economic Forum ranked Kazakhstan 10th best in the world in government budget balance as a percentage of GDP, and 12th in government debt as a percentage of GDP. In addition, Kazakhstan was recently added as a new member of the Organization for Economic Cooperation and Development (OECD), the members of which account for 60% of global GDP. Kazakhstan’s economic stability and success over the past two-and-a-half decades allowed it to become the first Central Asian country to join the OECD.

Kazakhstan is extremely vigilant in its efforts to root out and prevent terrorist activity. President Nazarbayev has formed close partnerships with many Western countries, and has been outspoken in the need to fight back against radical Islam. In a September 2015 address, Nazarbayev called for a UN-led counterterrorism campaign that would seek to eliminate the causes of extremism while providing better mechanisms for tracking and extraditing terrorists. At the Central and South Asian Regional Conference on Countering Violent Extremism in Asia the participants approved a number of counterterrorism measures, but agreed that maintaining a unified civil society is similarly important from a national perspective. More so than any other country in the region, Kazakhstan has worked to empower inclusion and cooperation on the level of local and regional governments.


KEY

L E A D E R S H I P

President Nursultan Nazarbayev

President Nazarbayev has served as President of the Republic of Kazakhstan since its independence from the Soviet Union in 1991. Before that he also served as leader of the Communist Party and Chairman of the Supreme Soviet. Kazakhstan has seen growth on an economic level and in its standing internationally of President Nazarbayev. Kazakhstan has been active around the world, taken forward-looking positions on international terrorism, economic integration, and energy policy, while maintaining good relations with countries in Kazakhstan’s immediate vicinity and with leaders in the Europe and the United States. Nazarbayev led the push for the Kazakhstan 2050 Project that aims to put Kazakhstan in the top 30 most developed nations by the year 2050, and for the EXPO-2017 Astana, an international exposition hosted by the capital city and featuring the future in renewable energy technology.

15Key Leadership


15

Prime Minister Bakhytzhan Sagintayev

H.E. Bakhytzhan Sagintayev has served as Prime Minister of Kazakhstan since September 2016. The Prime Minister is tasked with implementing the Kazakhstan 2050 Project, and currently works to maintain Kazakhstan’s economic growth and development. Sagintayev previously served as First Deputy Prime Minister. He is an author of a number of scientific publications on State regulation of the natural monopolies, small and medium business development.

1515

Foreign Minister Erlan Idrissov

H.E. Erlan Idrissov was appointed for a second time as the Foreign Minister of the Republic in September 2012. Minister Idrissov has held multiple high level diplomatic appointments, including Ambassador to the United States. Minister Idrissov has stewarded Kazakhstan’s foreign policy to its most important achievements, most recently being Kazakhstan’s selection to the United Nations Security Council. Minister Idrissov launched the first Strategic Partnership Dialogue with the United States which has become a mutually beneficial and appreciated discussion platform for issues of mutual importance. Under Minister Idrissov’s leadership, Kazakhstan has also advanced a new Enhanced Partnership and Cooperation Agreement (EPCA) with the European Union.

17Key Leadership


Deputy Foreign Minister Yerzhan Ashikbayev

H.E. Yerzhan Ashikbayev graduated from the Al-Farabi Kazakh State National University with BA degree in International Relations. In 2012, he graduated with Master’s degree in Public Administration from the John F. Kennedy School of Government at Harvard University as the Bolashak Scholar. Yerzhan Ashikbayev started his career at the Ministry of Foreign Affairs of the Republic of Kazakhstan in 1998 as a desk officer at the Asia, Middle East and Africa Division of the Fourth Department. From 1999 to 2001, he held consecutive positions of Attaché, Third and Second Secretary at the Department for International Economic Cooperation. From 2001 to 2002 Mr. Ashikbayev served as Head of the Unit for Economic Cooperation with Europe and the Americas at the Economic Policy Department. In 2002, Yerzhan Ashikbayev was posted as First Secretary to the Embassy of Kazakhstan in Brussels. In March, 2005 he returned to the Foreign Ministry as Deputy Director of the Department for International Humanitarian and Economic Cooperation. In June, 2005 he was appointed Head of Foreign Minister’s Chancery. In 2007-2009, he served as Chairman of the International Information Committee; from 2009 to 2011 he held the position of Ambassador-at-Large – Advisor to the Minister of Foreign Affairs. In September, 2012 he was appointed Deputy Head of Prime Minister’s Office and in October, 2012 – Head of the Foreign Policy Center at the Presidential Administration. Since December, 2013 Yerzhan Ashikbayev serves as Deputy Minister of Foreign Affairs of the Republic of Kazakhstan. He speaks English, Turkish and French, and holds a diplomatic rank of 1st Class Counsellor.

Ambassador of Kazakhstan to the United States Kairat Umarov

H.E. Kairat Umarov has been an Ambassador to the US since January 2013. Prior this appointment, from 2009 to 2013, he served as a Deputy Foreign Minister. Over his distinguished career in the foreign service, he has held various positions at the Foreign Ministry and Presidential Administration, including two stints as Counselor and Deputy Chief of Mission at the Kazakhstan Embassy in Washington D.C., Ambassador-at-Large at the Foreign Ministry, and Chief Inspector at the Center for Foreign Policy of the Presidential Administration. From 2004-2009, he served as Ambassador to India. From 2009 to 2013 he was Deputy Foreign Minister overlooking bilateral relations with the United States. He co-chaired the Kazakhstan-United States Strategic Partnership Dialogue, and was Kazakhstan’s Sherpa at Nuclear Security Summits in Washington, D.C. and Seoul. Ambassador Umarov has served in Washington during Kazakhstan’s accession to the World Trade Organization in December 2015, and enhanced nuclear security cooperation with the United States.


19

A Brief History

o f t h e K a z a k h P eo p l e

Kazakhstan is best known historically as a crossroads of people and cultures. Over the centuries the Kazakh steppe played host to such great conquerors as Alexander the Great, Timur, and Genghis Khan. It was neighbor to the Safavid Empire of Persia, the Mughal Empire of India, and the many great Chinese dynasties, while forming part of the Mongol Empire, the Timurid Empire, and the Russian Empire. The civilizations that prospered in Kazakhstan over the centuries were among the most powerful and progressive of their eras.

The Kazakh khanates emerged in the centuries after the Mongols Empire fell away, as the people of Central Asia consolidated their land and created the outlines of the first Kazakh nation. The Kazakh Khanate was founded by Sultans Kerey and Zhanibek in 1465. The Khanate was located roughly on the territory of present-day Kazakhstan and was the first separate state of the Kazakhs. The formation of the independent Kazakh Khanate began when several tribes under the rule of Sultans Kerey and Zhanibek departed from the Khanate of Abu’l-Khayr Khan. The sultans led their people toward Mogolistan, eventually settling in the area between rivers Chu and Talas in modern-day southeastern Kazakhstan and founding an independent state. In 2015 Kazakhstan has celebrated the 550th anniversary of the Kazakh Khanate.

Between the 17th and 19th centuries the Kazakh peoples fought numerous wars against Chinese tribal confederations, but survived intact. Kazakhstan was incorporated into the Russian Empire in the 19th century, and became perhaps the second most important republic as part of the Soviet Union of the 20th century. From 1949 to 1989, the Soviet Union used the former Soviet oblast of Semipalatinsk in northeast Kazakhstan to test nuclear weapons.

19

21A Brief History of the Kazakh People


On December 16, 2016, the Republic of Kazakhstan will celebrate the 25th anniversary of its independence from the Soviet Union. The Republic of Kazakhstan became the first modern democratic state even established on Kazakh land. Just over three months after President Nazarbayev signed the Constitutional Law “On State Independence of the Republic of Kazakhstan,” Kazakhstan became a member of the United Nations. With its membership in the UN secured, Kazakhstan began to integrate into the international system and build diplomatic relations.

In the 25 years since its independence, Kazakhstan has taken strides in economics, domestic development, and international relations that have left its neighbors behind. From the turn of the century onward, Kazakhstan saw nearly a decade of 10% annual GDP growth, and as its economy continues to diversify economic prospects will continue to show promise well into the future. Kazakhstan has taken great steps to unify its diverse population in the vision of a modern and highly developed nation that values opportunity for all as a tenet of sustainable peace and growth. Furthermore, Kazakhstan has successfully built international partnerships, all while protecting its peoples against the terrorism and radicalization that have plagued its Central Asian neighbors.

25 Years of Independence

21

1991 – 2016


23

Eco n omy

An Economic Overview

When it comes to the size of its economy, Kazakhstan is one of the 50 largest countries in the world by nominal GDP. Kazakhstan’s GDP per capita of over USD $10,000 puts it solidly in a group of rising middle class countries.

Kazakhstan’s economy is driven by its oil production and exports. Gas is the next most common export, followed by ferrous metals, chemicals, machinery, agricultural products, and meat. The most valuable export partners are Italy and China, which account for 17.7% and 11.9% of Kazakh export value, followed by the Netherlands (10.8%), Russia (9.9%), France (5.8%), and Switzerland (5.8%). Russia and China are also the largest source of imports by a large margin, and account for 34.4% and 16.6% of the total import.

Kazakhstan’s GDP has grown consistently at about 8% over the past decade, but like much of the rest of the emerging world, has slowed with the oil crisis. Despite faltering economics throughout the world, Kazakhstan’s GDP is expected to grow steadily during the global economic slowdown. Kazakhstan’s two largest trading partners, Russia and China, have suffered immensely from the economic malaise and have affected Kazakh exports. As a result, the contribution of oil revenue to the national budget fell.

Despite the drop in revenue, Kazakhstan has not allowed the low cost of oil to bring economic development to a halt. Kazakhstan’s official unemployment rate stands at around 5%. The national poverty rate likewise declined, from 3.8% in 2012 to 2.7% in 2015. Poverty reduction has continued as Kazakhstan has created jobs in the service sector, increased public sector wages and social spending, and has generated new employment opportunities in all sectors of the economy.

RESERVED

Italy 17.7%

China12%

Switerland 6%

Russia 10%

Netherlands 11%

25Economy


25

Economic Landscape & Macroeconomic Indicators

Hydrocarbons are the main mover of GDP and growth in Kazakhstan, and the fall in oil price and subsequent diminished value of exports has damaged economies across the Commonwealth of Independent States (CIS) and Eurasia. Kazakhstan still managed to stave off the worst effects of the crisis, and maintain 1.2% GDP growth in 2015 by undergoing massive economic liberalization and opening its currency to the international market.

The recent crisis put inflationary pressure on consumer goods. Over the course of 2015, price controls set to limit inflation on consumer goods strained under the weight of inflationary pressure. In order to avoid serious inflation, and to allow the tenge to better adjust to investment and economic changes in the future, the National Bank of Kazakhstan announced in August 2015 that it would transition the currency to a floating exchange rate. The announcement was met with international approval, but caused the tenge to depreciate to T340/USD$1 by the end of 2015. The National Bank of Kazakhstan spent roughly $28 billion defending the value of the tenge between early-2014 and mid-2015. Central bank monetary policy is expected to bring inflation back down below 5% for 2017.

August 2015 to February 2016 was the worst period for commodity exporters, but since then the economic and financial situation has improved. Currencies in emerging market economies have improved as global sentiment toward risk aversion has waned and financial markets have strengthened. Capital flows have also stabilized, after the late-2015 panic about the Chinese economy drove capital away from emerging markets. Despite its recent troubles Kazakhstan stands to gain markedly in the new economic landscape. Kazakhstan is the first CIS member to seriously pursue a transition away from economic dependence on oil and gas. The World Bank recently recommended that commodity-exporting countries undertake significant structural reforms to benefit from price advantages associated with weaker currencies. Among the suggested structural reforms are reduced policy uncertainty, privatization, trade liberalization, and promotion of FDI. Thus far Kazakhstan has taken steps toward diversification by becoming a member of the WTO and expanding its international trade profile, and by committing to long-term structural improvements and transparency in the Kazakhstan 2050 Strategy.

The government of Kazakhstan has worked hard to broaden and diversify the current economic landscape. Technology has become a major driver of economic development, especially in the telecommunications sector. Fiber optic cables link Kazakhstan’s major cities, and there is 100% mobile market penetration. More than 54% of Kazakhstan’s 17.4 million people are internet users, compared to just 28% in 2009, and Kazakhstan supports more than 30 million mobile telephone subscriptions. Mobile phones and the spread of Internet usage is just one example of the country’s burgeoning centers of innovation. In 2005 the Park of Nuclear Technology opened to become a center of startups devoted to radiation technology, nanotechnology, and renewable energy. The Park of Information Technology in Alatau Village is a center for satellite communications and telecom services, and the National Industrial Petrochemical Plant was opened as a special economic zone. In 2015 the International Science and Technology Center was relocate to new headquarters in Astana.

Kazakhstan has consistently risen over the past five years in the World Economic Forum’s (WEF) Global Competitive Index. Kazakhstan is in the top 12 in the world in government budget balance and government debt as percentage of GDP, and still ranks 31st in the world in gross national savings even considering the recent economic downturn. In terms of labor market efficiency, Kazakhstan is 18th best in the world, with the 16th best labor market flexibility, and the 24th best “efficient use of talent.” Out of a possible score of 7, Kazakhstan scores a 6.3 in the quality of its healthcare. In the past five years, Kazakhstan has markedly improved the quality of public and private institutions, electricity and telephone infrastructure, quality of higher education, goods market efficiency and competition, and financial market efficiency.

By expanding its economic horizons, Kazakhstan has made good use of its capacity for solid international partnerships. An April 2016 forum brought together policy officials and thought leaders from the US and the Caspian region to discuss a potential Trans-Caspian trade corridor. It was envisioned as a method to expand business interaction among Kazakhstan, Turkey, the US, Georgia, and Azerbaijan. The Trans-Caspian forum fits with the greater Kazakh effort to drive economic development and enhance political stability by attracting overseas investment. Kazakhstan has built upon its continued success and religious, social, and political harmony to become a target for large investors and a locus of further innovation.

27Economy


27

RESERVED

Modernization & Development Agenda

The leaders of Kazakhstan do not want their country to simply bounce back from an economic decline with simple economic recovery. They want to break the mold of emerging markets economics with powerful growth and liberalizing initiatives that are a vision of the future of the Kazakhstani economy. The foundation for these initiatives is known as the Kazakhstan 2050 Strategy, which functions as an umbrella program intended to strengthen and diversify Kazakhstan’s economic future by transitioning to a knowledge-based economy. Kazakhstan 2050 Strategy is Kazakhstan’s answer to the instability and challenges driven by uncertain financial markets and a teetering global economy. By building a healthy private sector, stronger institutions, and better physical infrastructure, Kazakhstan hopes to attract investment and human capital while accounting for the growing number of risk factors in today’s economic climate.

The Kazakhstan 2050 Strategy was originally envisioned as a strategy for sustaining economic growth, but it has since become an outline for avoiding the pitfalls associated with overreliance on commodities. In a late-2015 speech, address to the nation, Nazarbayev identified five structural changes that must be implemented to strengthen and stabilize Kazakhstan so as to withstand future crisis. The first, stabilization of the financial sector, involved moving to a floating currency to save the National Fund and better complying with Basel Committee and International Monetary Fund (IMF) standards of practice. The second change, optimization of fiscal policy, would introduce a more practical tax regime, and increase fiscal transparency through better tax administration. The third step is privatization to promote competitiveness and long-term growth. Fourth, a new investment policy framework, is intended to bring in greater investment and create new jobs; and the fifth, a new social policy, intends to defend Kazakhstan’s vulnerable groups and enhance social welfare throughout the country.

Photo courtesy U.S. State Department

29Economy


29

31Economy


31

At the core vision of the Kazakhstan 2050 Strategy is that Kazakhstan will join the 30 most developed nations by 2050 as measured by GDP per capita as well as a wider range of social, political, and economic factors. Its purpose is also to transition the country away from reliance on petrochemicals and fossil fuels to a modern and diversified economy based on high levels of education, a strong private sector that promotes innovation and protects investment, and transparency of governance, the rule of law, and the financial system.

Two of the keys to the success of the 100 Concrete Steps will be, first, the growth of a more effective professional civil service and, second, the consultation of outside specialists to devote their expertise to Kazakhstan’s developmental mission. The public service will be especially important because it is a baseline necessity for Kazakhstan’s inclusion in the 30 most developed nations. Police recruitment and training will be much more rigorous. The judicial process will become more fair and balanced by expanding the rights of defendants and making better use of trial by jury. Tougher standards and better pay for teachers will also improve the school systems, which will in time attract talented international students.

President Nursultan Nazarbayev in November 2014 announced a robust domestic stimulus policy titled “Nurly Zhol” (Bright Path) that will drive state and foreign direct investment into critical infrastructure and priority sectors and drive economic growth. Nurly Zhol will total around $9 billion U.S. dollars and help to shift productivity towards agribusiness, manufacturing, trade and logistics, tourism, information technology and finance, and away from the oil sector. Importantly, Nurly Zhol will increase liquidity in the loans to small and medium sized business and domestic exporters. Nurly Zhol forecasts 4,500 new jobs by supporting SME growth.

STIID II plans to “stimulate diversification and improve competitiveness” of non-extractive industries during the period 2015-2019. With industrial innovation as its purpose, STIID II proposes to increase industrial production by 43% by 2019, increase gross value added by 1.4 times, increase industrial exports and create more than 29,000 jobs. More than 320 million dollars will be devoted to STIID II in 2016 after 960 million dollars was devoted in 2015.

Kazakhstan has invested heavily in SPIID II in part to avoid the so-called “middle income trap” of increasing transaction costs and decreased competitiveness that could cause economic growth to slow. In order to avoid the middle income trap, Kazakhstan will require accelerated growth of secondary industries and more exports. Accession to the World Trade Organization will help solve a number of problems related to non-extractive industries, including failure to properly adhere to practices of standardization, slow harmonization with standardization, and shortage of properly qualified technical and management personnel.

Kazakhstan 2050 Strategy is supported by three separate but parallel programs designed to guide structural innovation through the country. The second State Program for Industrial-Innovative Development (STIID II) is Kazakhstan’s second five-year plan for transitioning the economy away from exports and raw materials. “Nurly Zhol” (Bright Path) is the state infrastructure development program focused on financial reform, including the decision to float the Kazakhstani tenge. The Plan of the Nation (a.k.a. 100 Concrete Steps) is a plan to implement five institutional reforms targeting more transparent governance, better health and education, and removal of administrative barriers for small and medium-sized enterprises (SMEs).

The largest pillar is the 100 Concrete Steps, which stems from a 2015 address given by President Nazarbayev that lays out 100 steps to implement five urgent institutional reforms that will improve governance, education, and welfare, and business practices. It purports to turn Kazakhstan into a “modern state for all” through: 1) Creation of a modern and professional civil service; 2) Ensuring the rule of law; 3) Industrialization and economic growth; 4) A unified nation for the future, and; 5) Transparency and accountability of the state. The 100 Concrete Steps will seek to remedy the oft-criticized investment climate in Kazakhstan, where irregular application of laws and regulations has driven away businesses.

RESERVED

KAZAKHSTAN TODAY


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35Economy


35

Foreign Investment Climate

Between 2010 and 2013 Kazakhstan attracted more than $100 billion in foreign direct investment. Non-extractive industries accounted for about a quarter of that amount. Kazakhstan provided state land grants, tax incentives, and other basic incentives to bring in investment. Kazakhstan relied heavily on investment by major international oil companies to jump-start its energy industry in the 1990s, and has long been considered the most stable and investor-friendly state in Central Asia. The largest portion of foreign direct investment revolves around extractive industries and agriculture. Investment in professional and technical services is also mainly directed toward its contribution to the oil industry. Chevron became the first major Western oil company to invest in Kazakhstan, with the creation of TengizChevroil in 1993.

Kazakhstan will not be able to sustain growth and investment in the future through more generous incentive structures alone. Roughly 11% in FDI flows to the manufacturing sector and basic metal and fabricated metal products, while sectors such as construction and financial services receive less than half of that amount. Kazakhstan is working hard to promote to increase the attractiveness of these industries and promote investment unrelated to oil. Kazakhstan is providing incentives such as tax waivers, easier acquisition of visas and work permits, and special incentives for investors putting more than $20 million in machine building, mining, chemical, construction, electric power, wind and solar renewables, and others. The government’s FDI incentives encourage knowledge-transfer to Kazakh workers.

Kazakh leadership has displayed its interest in making the country easier for businesses by creating in Almaty a Central Asian technology hub. About 4,000 IT companies already make their homes in Almaty, and the government intends for the establishment of another five tech centers to attract the most innovative tech minds to the Kazakh capital. Technological development has been one of Kazakhstan’s primary and most consistent foci in the 21st century, and events such as ASTEX 2015 and Almaty’s many startup competitions and exhibitions show the progress that Almaty has made toward becoming the Silicon Valley of Central Asia.

Kazakhstan has recently sought to invite long-term foreign participation in the economy and the work force, and has since changed a number of the restrictions to meet WTO standards. The foreign equity limitation on the telecommunications industry will be lifted two-and-a-half years after WTO accession as part of the WTO Basic Telecommunication Agreement, foreign banks and insurance agencies will be allowed to establish branches five years after accession, tourism and travel agencies two years after accession, and wholesale pharmaceutical/medical distributors five years after accession.

Accession to the World Trade Organization is a massive boon to Kazakhstan’s economic prospects. After nearly 20 years of applications and prospective membership, Kazakhstan became the 162nd member of the WTO on November 30, 2015. WTO membership will help Kazakhstan further integrate into the international community, and will draw more investment by providing a formal outlet for trade disputes and creating a cooperative trading environment. WTO rules mirror the system of equal rights and lawful economic activity that the Kazakhstan 2050 Strategy inspiring in Kazakhstan’s domestic economic environment. As Kazakhstan’s alternative sectors progress in the coming years, trade will provide Kazakhstan’s consumers greater variety in their goods, and will allow Kazakhstan to trade a broad range of goods more freely. Because the commodities sector remains uncertain, Kazakhstan will need secondary export goods to continue the strong economic growth it has demonstrated over the past two decades, and no organization will more readily assist that process than the WTO.

The main countries-investors(2005–2015,bln. USD)

Netherlands 64.0

USA 23.8

Switzerland 15.0

China 13.1

France 12.2

UK 11.5

Largest Foreign Investment by Country

37Economy


37

Kazakhstan's Process for FDI Attraction

Government Council

In-country Investor Advisory

1

2

Kazakhstan seeks to align FDI climate with OECD standards

Sectoral and regional investment plans with KPIs developed in coordination with Ministry of Investments & Development

Problem solving (Ombudsman)3Review of problem cases

Public agencies, national companies andmayor’s offices’ hearing

Investors are introducted to public agencies, national companies and the private sector

4

1. New directions:- Infrastructure (transport,housing, social, energy) andPPP, mining- M&A- Portfolio investors- Funds

2. SPIID 2 industries(Greenfield): metallurgy, chemical andpetrochemical industry,mechanical engineering,production of constructionmaterials, food industry

Control of the implementation5

Embassies of Kazakhstan in 10 countries have Investment advisers available for consultation

1 KazNex Invest has representative offices in multiple countries

2

Provision of investors with access to land andinfrastructure, Special Economic Zones

2The regional councils under the leadership ofgovernors together with the NCE

1

One Stop Shop for investors

2017 GUIDE TO KAZAKHSTAN FOR AMERICAN BUSINESSES

39

Kazakhstan Special

Eco n om i c Zo n e s BURABAY

PAVLODAR

ASTANA

SARYARKA

CHEMICAL PARK TARAZ

ONTUSTIK

PARK OF INNOVATIVETECHNOLOGIES

KHORGOS

NIPT

SEAPORT AKTAU

Kazakhstan is once again growing as an attractive investment destination. The decision to float the Kazakhstani tenge will reduce speculative pressure on the currency in light of the volatile energy market. Over the long term, it will allow the financial system to stabilize and better value foreign investments, while not forcing the National Bank of Kazakhstan to use excess international reserves for exchange rate targeting. Kazakhstan has also dramatically improved in a number of global indicators for investment climate and ease of doing business. It has moved up to number 41 in the world for Ease of Doing Business in the World Bank’s 2015 Doing Business Report. In the same report it moved up to 21 in the world in ease of starting a business. Kazakhstan is now ranked 25th in Protecting Minority Investors and 25th in Macroeconomic Environment Ranking. Kazakhstan has created Special Economic Zones (SEZs) to further encourage foreign investment:

41Kazakhstan Special Economic Zones


National Industrial Petrochemical Technology Park

Development of investment projects to build a world-class petrochemical plants for intensive processing of hydrocarbon raw materials and production of a comprehensive and competitive range of petrochemical products with high added value, investment in the construction and development of an integrated petrochemical industry based on public-private partnerships, construction of new interconnected, highly innovative petrochemical plants, promoting and creating certain conditions for the integration of the Kazakh petrochemical products into the global system of production and marketing.

Saryarka

Development of metal processing industry, in particular the production of finished products by encouraging the producers of worldwide brands to participate, develop and implement breakthrough investment projects to build and develop a world-class petrochemical plants for intensive processing of hydrocarbon raw materials and production of a comprehensive and competitive range of petrochemical products with high added value; development and implementation of research and scientific and technological innovation projects to establish and develop petrochemical production and treatment technologies, including deep processing of hydrocarbon raw materials.

Burabay

Development of high-performance, competitive tourism infrastructure to provide and meet the needs of local and foreign tourists, creation of a base for the use of environmentally friendly transport, including small aircraft in order to ensure access to all recreational facilities, creation of a common and accessible information base for tourist services.

Ontustik

Development of textile industry, attraction of producers of the world brand names for textile production, creation of high-tech industries, quality improvement and manufacturing textile products.

Astana - new city

Accelerated development of Astana city by attracting investment and the use of advanced technologies in construction, development of modern infrastructure and the creation of high-performance, high-tech and competitive industries and new products development.

Innovation Technologies Park

Technological development of the areas such as information technology, technology in the field of telecommunications and communications, electronics and instrumentation, renewable energy, resource conservation and efficient use of natural resources, technology in the creation and application of materials for different purposes, technology in the field of production, transportation and processing of oil and gas.

Seaport Aktau

Development of the region to strengthen the economy allowing entry into the global economic system, creation of high-performance capabilities, including high-tech and competitive industries, development of new products, attracting investments, improving the legal rules of market relations, implementation of modern management methods.

Pavlodar

Development of chemical and petrochemical industries, production of export products with the use of high-tech environmentally friendly modern technologies, research and scientific and technological innovation projects for the creation and development of chemical and petrochemical industries in the deep processing of raw materials and the production of a broad competitive products with high added value, creation of highly efficient and innovative production for the development of chemical and petrochemical industries, including high tech and competitive industries and the development of new products, creation of a favorable investment climate and attraction of foreign investment.

Khorgos - Eastern Gates

Creation of an effective transport and logistics and industrial center, ensuring the interests of trade and export activities and the implementation of potential transit facilities within Kazakhstan, as well as contributing to the development of economic and cultural exchanges with neighboring countries, implementation of the integration of Kazakhstan into the global system of production and distribution, creation of innovative, competitive domestic products in accordance with international standards.

Chemical Park Taraz

Establishment of new productions in chemical industry in accordance with high-performance technologies.



Each of the 10 SEZs has specific FDI incentives that it can offer to foreign investors. Incentives include subsidies of up to 30% on total capital expenditures on construction costs, 10-year corporate income and land tax exemptions, and property tax exemptions for eight years.

Kazakhstan will also benefit from China’s economic transformation away from heavy industry and cheap exports. Kazakhstan is set to become a focal point in China’s One Belt, One Road strategy, and thus a massive trading and investment partner. The “New Silk Road,” the overland aspect of China’s One Belt, One Road, will rely on Kazakhstan as a gateway to trade with Europe. The Chinese government has invested nearly $30 billion in Kazakhstan’s oil, mining, agriculture, and transport sectors, and is helping to build up the Khorgos “dry port” as “one of the major cargo hubs of the new Silk Road.” More than 1,250 trains per year make the journey from China to Europe through Kazakhstan, and the project requires building a modern railway system to send goods through Central Asia. The proposed Trans-Caspian trade corridor will bridge trade from China to Kazakhstan with trade from Kazakhstan to Turkey, Georgia, Azerbaijan, and eventually toward the United States. Kazakhstan plans to invest at least $20 billion in the transportation industry by 2020 to make the New Silk Road possible. Kazakhstan will benefit immensely from the stimulus that the New Silk Road will create. Beijing has already established the $40 billion Silk Road fund, and the Asian Infrastructure and Development Bank (AIIB) was designed for the benefit of One Belt, One Road.



In an effort to build up investment and innovation, Kazakhstan is also focusing heavily on its information technology (IT) sector. The Astana Business Campus at Nazarbayev University will open its doors in 2018, and is expected to help Kazakhstan become a leader in research and ideas. The Astana Business Campus will work in tandem with the Kazakhstan 2050 Strategy to develop entrepreneurship, especially in the fields of science and technology, and use them to create a modern and diversified economic environment. The business campus will bring together Kazakh innovation and the giants of international technology. Among the 90 companies expected to participate in the Astana Business Campus are General Electric, Samsung, Microsoft, Intel, Hewlett Packard, and Huawei.

The Astana Business Campus will bring together students, scientists, technology companies, and innovators from all over the world to cultivate in Kazakhstan’s capital an ecosystem of knowledge and intellectualism. Just as Astana must have a stable and liquid capital market to attract investment, so must it have an open and attractive learning environment to attract human capital to Astana from throughout the country. The Campus is Kazakhstan’s effort to build its own “Silicon Valley” of technology and invention, and like Silicon Valley, the Astana Business Campus must be driven by domestic innovation.

RESERVED

45

The Graduate School of Business at Nazarbayev University has a strategic collaboration with Duke University’s Fuqua School of Business.


E x p o – 2 0 1 7

Starting on June 10, 2017, Kazakhstan will host EXPO-2017, a showcase of mankind’s greatest achievements and future possibilities for innovation. Astana, the UNESCO-declared “City of Peace” and capital of Kazakhstan, will be the first city in the CIS to host such an exposition. EXPO-2017 will create massive opportunities for urban development and infrastructure investment. The government of Kazakhstan has allocated over $300 million to constructing the exposition site, and The FDI will be used to build roads, railways, bridges, and create jobs both during and after EXPO-2017.

The theme of EXPO-2017, “Future Energy,” will showcase the changes Kazakhstan is implementing in its effort to transition away from dependence on hydrocarbons. The objective of the EXPO is to explore strategies for promoting and developing renewable energy that can be used across the globe, and to make Kazakhstan one of the centerpieces of the energy revolution. Kazakhstan, and specifically the capital of Astana, has extremely ambitious goals for EXPO-2017. Adrian Smith + Gordon Gill Architecture (AS+GG), the winners of the design competition for EXPO-2017, stated that Astana aims to become “the first Third Industrial Revolution city,” generating a significant portion of the energy to be consumed at EXPO-2017 through renewable sources and storing it using innovating technologies. The Expo Village itself will be constructed using smart grid technology that emphasizes spatial efficiency and energy conservation. Continuing the theme of renewables, the design venues will be converted into such usable spaces as museums, office buildings, and educational facilities after the exposition has concluded, so that the Astana Expo City 2017 does not become a deserted host city like so many that have come before it.

EXPO-2017 will do more than show the potential for an energy revolution, it will attempt to make Astana the first step in the revolution. The Astana Expo City design will emphasize the importance of efficiently harnessing and using renewable energy. For example, on-site buildings will have a special glaze to maximize solar heat gain in the winter and shade it in the summer, rainfall will be managed and recycled on site, and 90% of generated waste will avoid landfills. Buildings are designed so as to reduce their energy needs and harness maximum energy from the wind and sun, and a wind park near the exposition fairgrounds will cover the basic energy needs of the staging area itself. Six hundred hybrid fuel buses will carry visitors and participants around the grounds and the Expo Village. Energy security and energy development is the backbone of the Kazakhstan 2050 Project, and EXPO-2017 will be the showcase. Beyond energy, Astana will use its idea of a “smart city,” one that uses digital technology to improve services in urban centers, to implement modernizing projects in payment, education, and healthcare. More than five million people from 100 countries are expected to make the journey to witness the future of renewable energy and the innovation of modern Kazakhstan.

Expo - 2017 49


EXPO-2017 Astana will be the international showcase of Kazakhstan’s commitment to renewable energy and economic development, but Kazakhstan must continue to innovate in order to become a true international hub for investment. The Astana International Financial Center (AIFC), announced at a May 22, 2015 session of the Astana Economic Forum (AEF) will become a centerpiece of Kazakhstan’s growing financial infrastructure. The AIFC will be established on the premises of EXPO-2017, and will make Astana the key to Kazakhstan’s financial infrastructure, and a center of finance for all of Central Asia. As a key part of Kazakhstan’s transition to a more diversified economic future, the AIFC will be based on principles of English law, preferential tax regime, and an independent financial court.

Astana International Financial CenterEXPO-2017 will complement to Kazakhstan 2050 Project in its view to the future of innovation in Kazakhstan. Kazakhstan heavily exports oil and natural gas, which both contribute to global CO2 emissions. With its focus on “Future Energy,” EXPO-2017 Astana will put Kazakhstan at the forefront of countries working to curb the effects of climate change. One of the main themes of EXPO-2017 will be “energy for all,” meaning that access to energy is a basic human right. Not only will Kazakhstan showcase the steps its technology and energy sectors have taken in advancing renewable energy, the country will also demonstrate its improving human rights record, and the steps it has taken to provide equal rights and standards of living to all citizens of Kazakhstan.

Expo - 2017 51


AIFC is a view to Kazakhstan’s financial future and a necessary extension of the principles of EXPO-2017. The Center will take advantage of the ultra-modern infrastructure used to create the EXPO-2017 site, and will use the latest technology. AIFC will focus on aspects of finance essential for an international marketplace, while including elements specific to Kazakhstan and its Islamic heritage. The AIFC will develop a regional capital market that is liquid and well-balanced to attract key international investors, and insure that Kazakhstan’s largest companies look within their country for financing. The Center will create a strong Asset Management industry based on Kazakhstan’s favorable tax climate, readily available funding, and political and economic stability. Astana will provide the most modern financial infrastructure, with a focus on the FinTech sector of companies that leverage advanced technology to provide financial solutions. FinTech is considered one of the fastest growing sectors in finance, with total investments of $19.1 billion in 2015, and AIFC is making the development of a good environment for FinTech one of its main strategic initiatives. AIFC will also become an important hub for Islamic finance, and Kazakhstan as a whole is dedicated to financial infrastructure that provides solutions that are in accordance with Islamic law.


53

Kazakhstan – United States

R e l at i o n s

The relationship between the United States and Kazakhstan has identified the need to see greater bilateral engagement with the U.S. going forward. The U.S. has supported growth in Central Asia and views Kazakhstan as an important actor in the region, and the U.S was one of the first countries to recognize Kazakhstan upon its independence. Kazakhstan views the United States as an important trading partner.

53

55Kazakhstan – United States Relations


President Nazarbayev has partnered with the United States on a number of fronts. Kazakhstan has been a leader in partnering with the U.S. to support nuclear non-proliferation, having closed the Semipalatinsk Test Site, renounced its nuclear weapons in 1993, and participated in the last four Nuclear Security Summits. The threat reduction and nuclear nonproliferation remain important pillars of joint efforts to ensure global and regional security. Nazarbayev has also been on the diplomatic frontline with the U.S. by countering terrorism and extremism in Afghanistan and throughout Central Asia, as well as strongly opposing the spread of the Islamic State (ISIS). In 2016, the U.S., Kazakhstan, and other Central Asian nations partnered for the Steppe Eagle 2016 International Peacekeeping Exercise, which took place in the United Kingdom. The 13th annual Steppe Eagle exercise is a multinational peacekeeping and peace support training exercise. Steppe Eagle is a unique opportunity to build multinational cooperation in peacekeeping, bilateral cooperation between Kazakhstan and the United States, and to upgrade and enhance the professionalism of Kazakh peacekeeping forces. In keeping with its efforts to rapidly join the world’s most developed nations, Kazakhstan has partnered with the United States to better counteract illegal activities. President Barack Obama signed the Mutual Legal Assistance in Criminal Matters treaty between the U.S. and Kazakhstan on February 20, 2015, which allows for greater cooperation in identifying and locating criminals, performing searches and seizures, and freezing foreign assets.

U.S. Secretary of State John Kerry and Kazakhstan Foreign Minister Erlan Idrissov held on the sidelines of the 71st United Nations General Assemblyin September 2016, the fifth U.S.-Kazakhstan Strategic Partnership Dialogue. The Strategic Partnership Dialogue is a regularly planned policy consultation designed to advance bilateral cooperation on a number of strategic initiatives important to both Kazakhstan and the United States, including supporting security and development in Afghanistan, advancing regional economic integration in Central Asia, countering the threats of ISIL, terrorism, and violent extremism, and combating climate change. In March 2016, the sides launched the Strategic Partnership Dialogue’s committees, which emphasized the importance of the U.S.-Kazakhstan relationship not only as a bilateral partnership, but as a commitment to Kazakhstan’s important role regionally and globally.

U.S. Deputy Secretary of Commerce Bruce Andrews visited Astana on July 12th to promote bilateral relations and prospects for cooperation on Kazakhstan 2050, the “100 Concrete Steps,” and Nurly Zhol. The discussions with Foreign Minister Erlan Idrissov focused on Kazakhstan’s efforts to diversify its economy through technology and finance, and the opportunities for American investment and international trade. Vice Minister of Investment and Development Yerlan Khairov also discussed with Deputy Secretary Andrews Kazakhstan’s efforts to improve its business climate, and the country’s eagerness to attract American participation in its economic evolution.

Kazakhstan’s geography and natural resources are significant incentives for the United States to maintain a close bilateral relationship. Kazakhstan’s location puts it at the heart of a number of America’s greatest foreign policy and security challenges. It shares borders with Russia and China, persistent focus of American interests abroad, and is in close proximity to Iran, Afghanistan, and Pakistan. The U.S. will be eager to keep Kazakhstan strong for its own strategic purposes, but also so their might be a sturdy and reliable counterweight to the radicalism and security threats that consistently arise in Central and South Asia.

The majority of U.S. foreign assistance to Kazakhstan is focused on security and the support of democratic governance. The State Department provides funding for—among other things—mitigating climate change by working with the Ministry of Energy and business leaders to implement an emissions trading system, security assistance through law enforcement training and better relations between the countries’ military leaders, and for good governance reforms and human rights promotion. Thirty-one percent of American FY 2014 foreign operations assistance to Kazakhstan was directed toward economic growth.

The U.S. will be eager to see Kazakhstan’s political system develop and become more representative in the same way that its economy is doing currently. Kazakhstan is a rising middle income economy with stable leadership, and a close relationship with the government offers the opportunity for a strategic alliance that could prosper as Kazakhstan grows stronger. The more prosperity Kazakhstan’s middle class and general society achieves, the more likely is peaceful and sustainable political environment in the country.

The greatest benefit either side can gain from the relationship is through integrated economic partnership. Kazakhstan would gain hugely if it could attract American investment to boost the Kazakhstan 2050 Strategy, and the U.S. can gain from the image of countries diversifying away from energy resources and from a healthy relationship with a Muslim-majority country. The U.S. is especially needed in industries involving advanced technology and technology transfer. American expertise can contribute to the general climate of growth in Kazakhstan, and can help in more practical ways, such as providing technological expertise for the EXPO-2017 Astana.

The United States, however, can also derive strong economic benefit from its bilateral relationship with Kazakhstan. During the 3rd annual Kazakhstan-US Convention many U.S. Congressmen spoke about the potential gain from the relationship, and of Kazakhstan’s future growth opportunities. Representative Alcee Hastings of Florida said that Kazakhstan has “the kind of record in economics that would benefit all segments of [American] society.” Representative Ed Royce, Chairman of the House Foreign Affairs Committee, echoed those sentiments saying, “the objective is to put Kazakhstan on the map for U.S. trade and investment.”

KAZAKHSTAN TODAY


57


Kazakhstan – U.S. Commercial Crossover

The U.S. has more direct investment money in Kazakhstan than any other country, living up to the legacy of the United States-Kazakhstan Bilateral Investment Treaty of 1994 and the Investment Incentive Agreement of 1992. The US-Kazakhstan Business Association has supported and promoted the growth of American investment and business activity in Kazakhstan since its establishment in 1999. It counts among its members Sikorsky Aircraft, , General Electric, John Deere, Halliburton, and Exxon Mobil among others. Ambassador Kairat Umarov has also promoted cross-investment of small and medium-sized American enterprises in Kazakhstan and vice-versa.

The 100 Concrete Steps is an encouraging development for American investors. The Concrete Steps show the direction of Kazakhstan intends in areas like rule of law and improved business practices: two elements of the business environment that were off-putting to prior American investors. Current President of the Kazakhstan-U.S. Business Association and former U.S. Ambassador to Kazakhstan, William H. Courtney, praised the 100 Concrete Steps and Kazakhstan’s WTO membership. The potential for substantive growth and reform in Kazakhstan’s industrial and service sectors made the country attractive to investors in the past, and will continue to do so in the future. U.S. Deputy Secretary of Commerce Bruce Andrews recently visited Kazakhstan for talks, and as part of his trip attended the official opening of the Spancrete office in Astana. The U.S. Chamber of Commerce also has a large presence in Kazakhstan after opening in 1999. It was established with a cohort of 35 American companies but now advices hundreds of investors in Kazakhstan. Deloitte, Ernst & Young, and PricewaterhouseCoopers all have a presence in Kazakhstan, as do ING Bank and Citibank. Procter & Gamble, one of the largest consumer goods companies in the U.S., has a large office in Almaty. McKinsey opened an office in Almaty in 2013, and has maintained its intention to help Kazakhstan shape its future.

Between 1993 and 2013 U.S. firms invested more than $43 billion in Kazakhstan. This will be made even more beneficial by Kazakhstan’s accession to the WTO, which will be a boon to Kazakh SMEs and foreign companies eager to establish a presence in Kazakhstan. WTO standards will create lower tariffs, better intellectual property protection, and a more effective system of dispute settlement. Membership in the WTO will break down barriers to international trade and open global value chains to Kazakh SMEs.

Kazakh companies have worked hard to break in to the American marketplace, and they are now making headway. Air Astana is set to launch direct flights to New York in 2019, which will help position Astana as the geographical focus around which the rest of Central Asia revolves. Meanwhile Arba Wine has re-established Kazakhstan as a burgeoning frontier for world-class wine, and Tsesnabank is attempting to expand its presence to the United States. The US Agency for International Development recently launched its Business Connections program, which connects Kazakh business with American partners. As of 2015, the program allowed more than 160 Kazakh entrepreneurs to train in the US and meet with potential American partners.

Kazakhstan has often looked to the U.S. as a partner in the spheres of science and advanced technology. The Silicon Valley Innovation Center recently held a three-week seminar and camp for Kazakh winners of a tech competition held by the National Agency for Technological Development. The camp was designed to introduce the Kazakh team to mentors, allow them to establish relationships with foreign partners, and present their ideas and startups to tech investors in Silicon Valley. The camp also gave the team from Kazakhstan the opportunity to talk to experts from Google and Microsoft Technology Center, among others. Similarly, the Shahmardan Yesenov Foundation sponsored a competition that sent five grantees to promising tech start-ups in Silicon Valley in an effort to develop Kazakhstan’s intellectual profile.

Kazakhstan – United States Relations 59


61

Since its independence in 1991 Kazakhstan has sought to build and create international partnerships with an eye to having good relations with large regional players. This goal is based on principles of balancing and a multi-vector diplomacy, which are the key rods of Kazakhstan’s foreign policy of Kazakhstan.

Over the past decade Kazakhstan has been active in supporting efforts to foster peace- and security, and yet it faces-building measures, all while facing a number of serious regional challenges. Kazakhstan’s foreign policy and international relations balance on European and Asian fault lines, meaning it has great opportunities for success and will face greater challenges.

Global systemic economic and financial crisis, reinforced by mutual sanctions of global players, creates an unfavorable environment for the socio-economic development of the all the region’s nations. Kazakhstan also faces economic challenges, brought upon by the oil price collapse.

The country in oil prices. Kazakhstan also relies heavily on commodity exports, and on its trade relationships with Russian and China. In particular, the trade turnover between Russia and Kazakhstan fell 25% in 2015 ($15 billion) compared with statistics from 2014 ($20 billion). Economic relations with China also experienced a decline of 30 percent.

Traditionally, Russia is the biggest Kazakhstan’s largest trade partner of Kazakhstan. The two countries trade extensively, and because they share the world’s largest borders. At the same time, both states make efforts to strengthen the strength their economic cooperation. In December 2014, the Treaty of Good-Neighborliness and Alliance in 21st century between Kazakhstan and Russia has come into force. Moreover, there is an intergovernmental commission on cooperation between two countries that consists of 8 subcommissions in the sphere of interregional and border, military and technical, interbank and investment collaboration, industry, transport, fuel and energy sector, science and new technologies, and joint use and protection of transboundary water bodies. In addition, Russia is a member of Eurasian Economic Union as along with Kazakhstan and Belarus. The main goal of the EAEU is the development of economic cooperation in the Eurasian space.

RESERVED

K a z a k h s ta n ’ s L e a d e r s h i p

in the Region

63Kazakhstan’s Leadership in the Region


Kazakhstan is also an active member of Commonwealth of Independent States (CIS), Eurasian Economic Union (EEU), and is working on the building-up the pace of economic and trade cooperation on the basis of a full potential of the Agreement on Free Trade Zone (FTZ), as well as the deepening of cooperation in the cultural and humanitarian sphere. In the context of the Shanghai Cooperation Organization (SCO), Kazakhstan gives priority to key areas of political, economic, cultural and humanitarian cooperation as well as comprehensive security and stability. Kazakhstan’s admission to “Asia – Europe” Meeting (ASEM). Kazakhstan will continue to be a reliable partner on stabilization of Kazakhstan’s sustainable development course and achievements. Central Asia’s security and successful development is closely linked with the security situation in Afghanistan. Kazakhstan’s partnership support has been crucial to the effective operation of the Northern Distribution Network, supplying the International Security Assistance Force in Afghanistan. Kazakhstan has been providing humanitarian assistance provided $18 million of food aid equivalent to Afghanistan, educating young people, building and $50 million equivalent of educational aid and financial aid for infrastructure projects - intended for the construction of schools and hospitals, and rebuilding roads- to the amount of $2.4 million.

Kazakhstan places the utmost importance on its active participation in multilateral efforts to promote peace, and regional and international security. After the breakup of the Soviet Union, Kazakhstan, having witnessed the suffering of hundreds of thousands of Kazakhs as a direct result of nuclear testing, shut down the Semipalatinsk nuclear test- site and renounced its nuclear arsenal – the fourth largest in the world at the time. Today Kazakhstan is a leader in nuclear disarmament and the non-proliferation of weapons of mass destruction.

In this context, President Nursultan Nazarbayev at the Nuclear Security Summit in Washington, DC in April 2016 proposed a visionary document to achieve a stable and secure nuclear weapons free world, “Manifesto: The World. The 21st century.” Later, the Manifesto was circulated as an official document of the 70th session of the General Assembly and the Security Council.

China has become in recent years an increasingly large player in Kazakhstan’s market. Not only is China one of their largest trading partners and providers of foreign direct investment, it is also a conduit for the new Silk Road, known asor One Belt, One Road.

Kazakhstan pays attention to the development of fraternal relations with the Central Asian states. Kazakhstan is known for its role in furthering the dialogue of religions and civilizations. Kazakhstan, fully aware of the increased role of religion in modern society, hosts a Congress of Leaders of World and Traditional Religions in Astana every three years. Kazakhstan’s active role in addressing global issues is further evidenced by the annual Astana Economic Forum, a platform for dialogue to find effective solutions to the major economic and social challenges of our time. The AEF forum gathers world leaders, international experts, scientists, politicians and public figures, as well as representatives of financial institutions and the international business community.

For Kazakhstan, cooperation of regional organizations is important for promotion the stability and security of the Central Asian nations and to assist in pursuit of sustainable economic development and poverty reduction. The Conference on Interaction and Confidence Building Measures in Asia (CICA) holds a special place in the foreign policy priorities of Kazakhstan. Taking into account an increased number of participants, comprising of 28 states and rising international authority, the CICA is has become a full-fledged international organization. In May 2014 during the Shanghai Summit the, President Nazarbayev proposed to establish the Organization for Security and Development in Asia (OSDA) based on the CICA. Together with our partners in the Collective Security Treaty Organization (CSTO) Kazakhstan is working on ensuring stability and security in the region, countering new threats and challenges on the basis of international law.

In 2010, Kazakhstan was assumed the first republic from the former Soviet Union that became the Chairman of the Organization for Security and Cooperation in Europe (OSCE). Thus, the country has once again proven to be a leader in the Central Asian region and a reliable partner of European countries. Also, during its chairmanship in 2011 in the Organization of Islamic Cooperation (OIC) Kazakhstan initiated the creation of the Islamic Organization on Food Security. Creating this structure allows OIC countries to import grain and other supplies when in need, and contributes to the implementation of major investment and infrastructure projects in the OIC area.

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ZaysanAyagoz

Lepsi

PanfilovQapshaghay

ShuZhangatas

Saryshaghan

Balqash

Temirtau

AtbasarEsil

Rudnyy

Ekibastuz

Turkistan

Orsk

Aral

Leninsk

Shalqar

Embi

Beyneu

Aqsay

Shymkent

Zhambyl

Taldygorghan

Oskemen

Oaraghandy

Koksnetau

Petropavl

Qostanay

Arqalyq

Zhezqazghan

Qyzylorda

Aqtobe

Oral

Aqtau

Pavlodar

For more information on investing or doing business in Kazakhstan, visit www.trevianinternational.com

Astana

Atyrau

Almaty

K A Z A K H S T A NF O R A M E R I C A N B U S I N E S S E S

A N I N T R O D U C T I O N T O

On March 31, 2016, Kazakhstan’s President Nursultan Nazarbayev joined 50 world leaders at the fourth Nuclear Security Summit in Washington, D.C. In a speech at the Carnegie Endowment for International Peace, President Nazarbayev raised awareness to the most pressing task for the leaders this century: eliminating the threat of a third world war. The end of the Cold War marked a time of hope that the mistrust that had divided our world would give way to a new era of peace, stability and cooperation. But the danger now, a generation later, is that this historic opportunity is being squandered. President Nazarbayev’s strongly worded Manifesto: “The World. The 21st Century” is a challenge to his global counterparts to commit to peace and dialogue. Without such action, the President said the world was facing a real risk of plunging again into global conflict.

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Date post:	12-Apr-2017
Category:	Economy & Finance
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2017 Guide to Doing Business in Kazakhstan

Economy & Finance