Over the last two decades, Kazakhstan has been one of the fastest-growing transition economies. It has taken steps towards institutional integration in the global economy, joining the World Trade Organization and signing an Enhanced Partnership and Cooperation Agreement with the European Union in 2015. The nation has been working to adapt best practices and standards recommended by the Organization for Economic Co-operation and Development.
Kazakhstan has been implementing comprehensive reforms gearing towards equitable distribution of benefits and responsibilities, leading role of private enterprise, fair competition, increased productivity, human capital development, green economy, environmental protection. It is committed to promote a well-balanced economic development of regions taking into consideration their competitive advantages. Creating a truly diversified and technological economy and sustainable economic development are long-standing priorities.
The county has made substantial progress in improving good governance, reforming the civil service and introducing e-governance. It has been increasing competition, supporting small and medium-sized businesses, encouraging research and development, foreign direct investment. Strenuous efforts have been made to reinforce the rule of law, reform judiciary and law-enforcement agencies. Free trade practices and more prudent monetary and budgetary policies have been pursued.
Economic progress has become increasingly inclusive, bringing benefits to a wide spectrum of the population. Many efforts have been made to strengthen women’s participation in the economy.
Today Kazakhstan is an upper-middle-income country with a conducive business environment. There is an enormous untapped potential in many sectors including ferrous and non-ferrous metallurgy, petrochemicals, machine building, production of construction materials, pharmaceuticals, medical equipment, IT, data storage and processing and others. There are more opportunities in creating large ecosystems in the production and processing of meat, fruits, vegetables, cereals, oilseeds and dairy products. Fish industry is very promising.
Kazakhstan has been continuously improving existing legal framework and practices. Many business and investment regulations have been streamlined to ensure fast and easy registration of small, medium and large businesses and simple post incorporation compliance.
For instance, during the incorporation via e-platform, it is also possible to apply for a VAT registration, open a bank account and register for the obligatory life and health insurance for employees. Property transfer process was simplified, the clearance of the plans for engineering networks was eliminated.
The tax code was amended to simplify the fulfilment of tax obligations and minimise the number of taxes and payments.
Robust measures have been taken to digitalise the economy and public services particularly recently against the backdrop of the COVID-19 pandemic. Essential public services are offered online by the Government for Citizens, a noncommercial joint stock company that operates as a one-stop shop. Mega data centers are under construction in big cities. The main goal of a special national program Digital Kazakhstan is the improvement of the competitiveness of the Kazakhstan's economy and the quality of life through digital ecosystems. 5G internet will be launched in Nur-Sultan, Almaty, Shymkent and regional centers.
The country is located along transcontinental routes between Europe and Asia. Thus, Kazakhstan offers land transport that is much faster than international sea shipment and cheaper than air freight. The country has been heavily investing in transport infrastructure development. Under a huge national program Nurly Zhol (Bright Path) motorway and railway network was built and repaired, ports on the Kazakhstan’s coast of the Caspian Sea and airports were modernised.
Kazakhstan established a dry port and a free economic zone on the border with China that provide easier access to China's market. The zone has many other facilities including storage, production, textile manufacturing, chemical and metal treatment.
Kazakhstan provides lucrative tax preferences under investment projects, including exemption from corporate income tax, land tax, property tax. Companies introducing environmental technologies will be exempted from emission charges.
Furthermore, there are other incentives in special economic and industrial zones. Special economic zones offer essential turn-key infrastructure and exemptions from import tariffs, land tax, property tax and value-added tax.
Industrial zones give access to infrastructure, including digital networks and state in-kind grants. For example, land plots, buildings, structures, machinery and equipment, computers, measuring and control devices, vehicles (excluding motor vehicles), production and household equipment can be received as state in-kind grants.
Contract sanctity and stability have always been central to the drive to bring foreign business, who have been protected from subsequent changes in taxation or other policies during the life of the contract.
In the nearest future to enshrine the agreements between the state and investors, a new instrument - a strategic investment agreement will be introduced. A pool of projects to be included in these strategic agreements will be drawn up in the nearest future. Under strategic projects special treatment will be foreseen including tax preferences, grants in kind, concessional financing and export support. Some capital expenditures of investors may be refunded through tax rebates.
A proper institutional framework was established to protect and promote business and investment. A Foreign Investors’ Council is chaired by the President of Kazakhstan. The Prime Minister acts as an Investment Ombudsman, a Business Ombudsman has an extensive mandate. An investment promotion agency Kazakh Invest acts as a single negotiator on behalf of the Government providing services to investors on the one-stop-shop principle across all the regions of the country.
Another important partner for foreign companies in Kazakhstan is the Astana International Financial Centre or the AIFC. The Centre serves a diverse customer base: companies and individuals, newcomers and large corporations involved in financial, industrial and trade sectors. The main activities of the AIFC are capital markets, asset management, private banking, green finance, financial technology.
The AIFC has a unique jurisdiction based on the principles, norms and precedents of the law of England. A special amendment to the Constitution of Kazakhstan was introduced to this end. The AIFC Court, which is separate and independent from Kazakhstan’s judiciary system, comprises the Court of First Instance and the Court of Appeal.
Thus, a foreign company or individual not acquainted with the Kazakh law has an option to enter the Kazakh market incorporating a new entity in the AIFC under the English common law.
A friendly tax regime and operational incentives help reduce expenses and make the cost of doing business in the AIFC attractive to its clients and increase their competitiveness.
There are two Market Institutions registered with the AIFC: the Astana International Exchange or AIX and the Astana International Exchange Central Securities Depository, the clearing organization.
The AIX technological platform was designed jointly with NASDAQ and complies with high requirements and expectations of global market participants. The Exchange offers a full-scale business cycle including trading and settlement clearing transactions.
The country has been focusing on human resource development sending thousands of young people to study at best universities abroad through a state-funded program Bolashak (the Future) and channeling significant resources in education at home.
Kazakhstan is continuously making structural and institutional reforms to improve the existing business environment. President of Kazakhstan Kassym-Jomart Tokayev outlined further comprehensive measures in this area. Particularly, an environmental code in line with OECD practices will come into force next year. A new business regulatory system, new monetary and budget policies, a new privatisation plan will be developed. Furthermore, tax offences will be decriminalised, customs procedures streamlined.