Working to Attract More Investors and Stay Competitive

At the June 12 meeting of the Foreign Investors Council under the President of Kazakhstan in Borovoye, the picturesque resort in northern Kazakhstan, the head of state, Nursultan Nazarbayev, did something that he rarely does: He publicly signed a new law on the enhancement of the country’s investment climate, introducing sweeping reforms and major incentives.

In particular, Kazakhstan has now introduced a set of measures to attract investors, including the exemptions from corporate income taxes for 10 years (to enter into force on January 1, 2015); exemptions from land taxes for 10 years (to enter into force on January 1, 2015); exemptions from property taxes for eight years (to enter into force on January 1, 2015); and the compensation of up to 30 percent of capital costs by the state after a newly-built facility is launched into operation (a so-called investment subsidy).

The new law also introduces the “stability” of tax rates, charges and fees (excluding value-added tax and excise taxes), environmental fees and charges (for the use of surface water resources, wildlife, forests or protected areas and for emissions into the environment) for 10 years after the conclusion of contracts with investors. This provision will also enter into force on January 1, 2015.

The law also grants investors the right to attract foreign labour during the construction period and one year after commissioning their newly-built facilities, without quotas for foreign labour.

The law further states the there will be limits on tariffs for all services of natural monopoly entities in the long term (five years or more).

It also introduces the “one window” principle; namely, a portal to the Investment Committee of the Ministry of Industry and New Technologies (MINT) that will be responsible for the coordination of issuing permits for investors and providing information. The Investment Committee of the MINT will now have the competence to assist investors in providing guaranteed procurement orders from interested legal entities to investors in case there are investment contracts signed with them.

The above-mentioned package of incentives will be provided for new investment projects worth at least $20 million in the priority sectors of the economy. According to the MINT, the list of priority sectors will be approved by the government in July 2014.

Along with this, the government has developed a comprehensive plan to attract direct foreign and domestic investment (approved by governmental decree #570 on June 5, 2014). The plan consists of five major directions: adopting a new package of incentives to attract foreign and domestic investment; improving activities of special economic zones (improving tax legislation, creating a single SEZ operator); simplifying the visa regime (visa-free regimes with 10 priority countries); enhancing the “investment ombudsman” institution (legislative consolidation of its status); and creating a concrete plan to attract foreign and domestic investment to Kazakhstan in 2014-2015 (compiling a list of interested investors, appointing responsible people, conducting informational-branding work in host countries).

The amendments described above mean Kazakhstan is obviously consistently working toward its goal of becoming one of the top 30 most developed countries. It has a consistent policy on improving its investment climate and it follows through on it, including through measures such as waiving visa requirements for short visits by citizens of 10 countries.

These efforts gain additional significance as Kazakhstan pursues them just as it has signed a treaty on the creation of a Eurasian Economic Union (EEU) along with Belarus and Russia. These new investment attraction measures mean Kazakhstan wants to retain its competitive edge in the new union.

The adoption of the new law will improve the investment climate, as well as create the conditions to attract foreign and domestic investment to the priority sectors of Kazakhstan’s economy. Foreign companies, both large and medium, will surely stand to benefit from the new measures and the opportunities to set up businesses in Kazakhstan with a view of expanding their sales and services into the EEU countries.

Kazakhstan has already attracted more than $190 billion in foreign direct investment since gaining independence in 1991, more than all other countries in Central Asia combined. The new package is expected to make this figure grow further.