Kazakhstan, being one of the top producers and exporters of oil, gas, coal and uranium, has demonstrated sustained and steady growth in its energy sector for many years. At year-end 2017, crude oil production in Kazakhstan reached 86.2 million tons, which is 10.5 per cent higher than in 2016. Last year’s production set a record in the entire history of the country’s oil and gas industry. Today, the oil sector is the source of crucial support to the consolidated budget of the country, including the movement of funds through the National Fund. All this demonstrates Kazakhstan’s investment attractiveness and creates favourable conditions to encourage foreign investors’ activity.
Due to the investment policy at the state level, implementing the strategy of entering the list of 30 most developed economies by 2050, Kazakhstan remains a regional “magnet”, accounting for more than 70 per cent of the gross volume of foreign investment attracted to Central Asia.
Over the past few years, the country has made significant progress in improving its investment regime and business environment in general. To attract more investors, the country offered tax and a number of other non-tax incentives to increase its attractiveness. According to the Doing Business 2018, Kazakhstan owned the 36th position in terms of general ease of doing business.
However, the basic point Kazakhstan refers to is Organization for Economic Cooperation and Development (OECD) standards. Kazakhstan has already received the status of the OECD Investment Committee associate member and became the 48th country to join the OECD Declaration on International Investment and Multinational Enterprises which highlights the compliance of investment climate of the country with the standards of the association.
The current investment climate in Kazakhstan is characterized by such positive aspects as:
- macroeconomic and political stability;
- effective and well-developed state policy on attracting investment;
- flexible tax system with substantial benefits and preferences for foreign investors;
- strong legal guarantees for foreign investors and effective mechanisms for resolving disputes;
- administrative and bureaucratic barriers reduction, implementation of precautions against corruption, bribery and favoritism;
- the government openness to communicate with foreign investors, good information support.
The main factor for the country’s investment attractiveness is the high profitability of investment projects compared to the developed countries, as well as substantial strengthening of investment security.
Investment attractiveness is explained by high activity of development institutions and direct material support to foreign investors, including Astana International Financial Center with its special legal regime based on the English Law. Attraction of non-resource investments is particularly emphasized for export-oriented goods production and services provision with high added cost.
Adoption of the National Investment Strategy for 2018-2022 also became one of the main steps to attract foreign direct investors. Within the framework of the National Investment Strategy, the principle of focused work with investors is implemented for an “early response” to the issues troubling investors. Against this background, Kazakhstan has already made tangible progress towards simplifying administrative procedures and reducing bureaucracy.
Also, the country’s leadership has implemented a radical reform of deregulation and drastically reduced administrative pressure, including foreign business.
Moreover, new tax and customs regimes corresponding to advanced international standards were put into practice. In turn, recently adopted Customs Code promotes transparency of customs procedures, including the procedures performed via the introduction of electronic declarations with automatically released goods availability. Improvements in migration and labour legislation have been introduced, as well as simplification of procedures for foreign labour involvement.
Taking into account the importance of commodity sector investments, a new Code on Subsoil and Subsoil Use has been introduced. Changes in the Subsoil Code facilitate investments by further increasing Kazakhstan’s competitiveness as an attractive investment destination.
Also, there are vital improvements in the sphere of public-private partnership with account of the Law of Kazakhstan “On Public-Private Partnership” dated 2015.
In addition, Kazakhstan is implementing a large scale privatization program planned to reduce the share of state-owned enterprises in the economy to 15 per cent by 2020. Privatization will cover the enterprises engaged in the oil and gas sector, electricity generation, transport and logistic, manufacturing of industrial goods, communications, postal services, etc.
In order to diversify the economy and create new investment opportunities, Kazakhstan is implementing comprehensive measures, including the Strategic Development Plan of Kazakhstan until 2020, the Nurly Zhol State Program, the State Program for Industrial and Innovative Development, the State Program for Agroindustrial Complex Development.
The Law “On Investments” introduced the position of Investment Ombudsman – a government authority responsible for defending the rights of investors. However, this is yet another authority aimed at supporting foreign investors. The first such body is the Foreign Investors Council under the Kazakhstan’s President.
In general, Kazakhstan’s success in attracting substantial inflows of foreign investment in the years since independence has accelerated the country’s national development and the overall transition to a market economy.