It’s Time to Invest in Kazakhstan
Yerlan Khairov, the Chairman of the Investments Committee under the Ministry of Investments and Development of Kazakhstan, answers the questions of the Kazakhstan magazine.
Yerlan Kartayevich, last year implementation of the industrial program for attraction of investments, development of SEZ and export stimulation has been completed. How would you assess the effectiveness thereof from the point of view of the target indices?
First of all I would like to mention that the Program has become one of the most important reference points in the field of the country business and investment environment improvement. It provided for structuring of the complex system for stimulation of direct foreign investments inflow, as well as support of domestic products export. For 5 years of implementation thereof a great work has been performed, and as a result of this work more than 80% of the planned targets have been achieved.
If to speak about the particular figures, then for example 74% of total foreign investments volume attracted to the processing industry of the domestic economy for the last ten years falls particularly to the period of the Program implementation.
Generally despite decrease of the global investment activity, for the last five years Kazakhstan annually attracts about $20 billion of foreign investments.
All these are the results of the systematic measures undertaken and favorable changes in the legislation.
In particular, we have made the number of researches in order to analyze Kazakhstan investment climate in comparison with other countries to detect the most attractive parts for the investors. Based on such analyses the offers on improvement of the legislation relevant to this sphere, have been developed.
As a result in 2012 the measures for exemption of the investors from customs duties on technological equipment, raw stocks and materials imported from the third party countries and from the Customs Union member states for the investment project implementation have been introduced.
Moreover, in 2014 owing to the well-timed decision of the State Head in our country in fact the new investment climate has been created. Namely, the Comprehensive Plan on Investments Attraction has been adopted, the new law providing for tax preferences, legislation stability and investment subsidies has been signed.
Also within the frameworks of the Program there has been structured the vertically integrated system for investments attraction based on the principle of foreign entity – center – regions. In addition the procedure of foreigners entry to and staying in the country has been simplified as much as possible.
Due to the work performed the significant number of foreign companies and investors have been attracted to Kazakhstan, including the large-scale global technological companies. In this respect the fact that the more and more investors taking the niches in the processing industry, particularly, is quite encouraging. Today the leading international brands operate in this field of Kazakhstan economy. Among them there are French companies Danone (food-processing industry), Alstom (railway branch), EADS Group (cosmos industry), Thales (instrument engineering) and Areva NC (nuclear industry), German companies – HeidelbergCement, Knauf (building industry), Siemens (equipment manufacturing) and Linde AG (chemical industry), American – General Electric (machine building industry), Dutch – Philips (medical equipment manufacturing), and Japanese companies – Toyota (automobile industry) and Sumitoma (mining and metallurgical complex). And this is the far not complete list.
The Program also has promoted development of special economic zones. Within the program frameworks four special economic zones have been created – “Saryarka”, “Pavlodar”, “Khimpark Taraz” and “Horgos – the Eastern Gates”, also significant work has been performed for completion of their infrastructures construction and filling thereof with the investment projects.
Generally for the period of 2010–2014 about 7 thousand jobs have been created on SEZ territories, the production volume has amounted 620 billion tenge, and the volume of investments contributed to the projects reached the amount of 338 billion.
At the same time, with respect to some indices we failed to get the expected results, but this is conditioned by the objective causes. As you know, implementation of the Program and the first five-year period of industrialization fall within the years of the global economic crisis. The growth rates of the global economy have slowed down and as a result the flows of DFI have decreased. So, according to UNCTAD data in 2014 the volume of global investments in comparison with the prior-to-the-crisis year 2007 has decreased by 34%, and in the countries with transitional economy this index fell down by nearly 50%. Of course, all these factors could not help but impacted Kazakhstan also. However despite the existing situation we have managed to maintain the stable DFI inflow at the level of $20 billion. Moreover we have managed to achieve increase of investments into the processing industry. All these are owing to the measures undertaken within the scope of this Program.
How has the situation changed in the field of DFI attraction to Kazakhstan economy according to the results of the year 2014?
As I have mentioned above, the volumes of foreign investments at the global markets experience some decline. At the same time according to the results of the last year our Republic by this index has outstripped many other transitional economy countries.
So, $3,7 billion of investments have been attracted just to the processing industry of Kazakhstan, which is by 48% higher in comparison with the last year, when the volume thereof has amounted $2,5 billion.
Once again I would like to emphasize that such results have been achieved owing to the systematic work with foreign investors and favorable changes in the legislation.
So, since January of the current year we have commenced implementation of the practical steps for realization of the investors support measures within the scope of the Law on the investment climate improvement adopted last year.
Today in the Ministry of Investments and Development a special Investors Service Centre operates. It is intended for the companies implementing the top-priority investment projects. The center is created based on “one window” principle, which significantly minimizes participation of the investors in documents collection and preparation, as well as limits their immediate contact with the state bodies.
Moreover, for foreign investors convenience the representative of the Public Service Center (PCS) works in the Center and helps with high quality and quick obtaining of the automated state services.
Also in the Investment Committee there is a call-center (+7 7172 75 45 40), where any investor may call and get consulting on the issues of interest.
Besides, in order to protect rights and legal interests of the investors, the investment ombudsman actively operates. According to the Government Resolution adopted in the beginning of February of the current year these functions have been imposed on the Minister of Investments and Development Mr. Aset Oriyentavich Isekeshev. In this connection the principle mission of the investment ombudsman is resolution of the operating investors’ problems, which they may face in the process of their work in Kazakhstan.
Today we can already say that launch of this institution brings its results. For example, owing to the ombudsman soon not far from Astana there will be constructed a plant to the amount exceeding $200 million. Also subject to intermediation of the investment ombudsman JSC “NC “KTZh” and Vicat company have managed to come to the mutually beneficial agreement on extension of the train-handling capacity of one railway station. And there are a lot of other similar examples…
As you see, we are always open for constructive dialogue with the investors to make Kazakhstan investment climate better.
What are your plans in the field of investments attraction within the scope of the second five-year period of the new industrialization?
The task number one for this year is to continue implementation of the commenced projects and not to allow decrease of investments flow. Our purpose is to make Kazakhstan a magnet for investments.
For this, first of all it is planned to complete transfer to the international standards in this field. Currently, jointly with other interested state bodies we take comprehensive measures to implement recommendations of the OECD experts for improvement of the country investment climate. According to the results of our work the representatives of this organization will assess it and prepare the next review. In future OECD recommendations will help further improvement of our investment climate and growth of Kazakhstan investment competitiveness.
Secondly, we have decided to focus on two key directions – attraction of new potential investors based on the country principle, as well as more active work with the companies already implementing their projects in Kazakhstan. In particular, under the first direction the large number of projects is being negotiated with China. This year already jointly with our Chinese partners we plan to implement the number of the investment projects in the field of machine-building, chemical industry, metallurgy and etc. Similar work is conducted with Iran and Turkey. In order to enter the new markets and get access to the technologies we plan to interact with TNC from South Korea, Germany, USA, Japan and France.
As regards the already existing investors today the large number of them (for example such companies as Heidelberg, NYK Line, Coca-Cola, Vicat) plan to re-invest into establishment of their new enterprises on the territory of Kazakhstan. This fact is the best evidence of their trust to our country and the investment climate thereof.