WTO Accession Will Improve Kazakh Investment Climate, Officials Believe

ASTANA – On the eve of the 10th World Trade Organisation (WTO) Ministerial Conference, to be held Dec. 15-18 in Nairobi, Kenya, a briefing on Kazakhstan’s accession to the organisation, chaired by Minister for Integration Zhanar Aitzhanova and Deputy Minister of Foreign Affairs Aleksey Volkov, was held at the Kazakh Foreign Ministry. Representatives of the diplomatic corps accredited in Kazakhstan and the Kazakh media were invited to the event.
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“Membership in the organisation will give substantial impetus to further economic development of Kazakhstan through deeper integration in the world community with its transparent mode of regulation of the economy. The country is ready to shift the level of cooperation in trade and investment to a new level,” said Volkov.

He noted WTO membership requires a more responsible approach of shaping decisions related to further economic reforms which will comply with the provisions of the WTO agreements. The diplomat added that the EU-Kazakhstan Enhanced Partnership and Cooperation Agreement is expected to be signed during next month’s visit to Astana by EU High Representative for Foreign Affairs and Security Policy Federica Mogherini.

Volkov added the Eurasian Economic Union (EAEU) is interested in establishing a direct dialogue with the EU. He also maintained that simplification of a visa free regime is one of the priorities of cooperation with the EU.

“Kazakhstan, as a country with a population of more than 17 million people and a fairly high standard of living, does not represent a migration threat to the EU. More than 100,000 Kazakh citizens visit Europe annually. We are interested in simplification of a visa free regime rather than its complete abolition,” emphasised the deputy minister.

Volkov also noted as a result of the recent visit to the capital by United States Secretary of State John Kerry, the sides have agreed to hold regular meetings in the format of “C5+1.” The foreign ministers of both countries expressed their commitment to developing regional trade, energy, communications and transit potential and improving the investment climate of the region as a whole.

Speaking at the briefing, Aitzhanova provided statistics on foreign trade turnover and foreign direct investment (FDI) to Kazakhstan, the main trade partners of which are Russia, China, Italy, France, the Netherlands, the U.S., Canada and Switzerland.

“Agricultural export subsidies will be eliminated from the date of accession. A transitional period until 2018 has been agreed upon with regard to application of VAT (value-added tax) preferences for domestic producers and processors of agricultural goods. Tariff and VAT preferences provided to companies registered within special economic zones and free warehouses are phasing out by January 2017,” she said.

“Bilateral goods market accession negotiations have been completed with 30 WTO members. Kazakhstan will introduce exemptions from the Common External Tariff of the Eurasian Economic Union for the list of approximately 4,000 tariff lines, which includes pharmaceuticals, medical and other equipment, spare parts, chemical products, automobiles, wood, fish and other products,” said Aitzhanova.

Bilateral services market access negotiations have been completed with 15 WTO members, she added. Kazakhstan undertook service commitments in 10 sectors and 116 of 155 sub-sectors in the WTO classification. Among the 10 main services are business, communication, construction, education, finance, tourism, recreation, transportation and environment.

After WTO accession, Aitzhanova indicated Kazakhstan will apply for a 50-percent limitation on the number of foreign managers and specialists within a company through intra-corporate transfers (ICTs). Executives, managers and specialists who are temporarily transferred by the WTO-member juridical person established in Kazakhstan for the supply of services can be transferred to Kazakhstan.

In terms of financial services, Aitzhanova emphasised that in order to maintain the stability of this highly-sensitive sector upon expiration of a five-year transition period, when the country will open its market to direct branches of foreign banks and insurance/reinsurance companies, prudential requirements for branches of foreign financial organisations will apply.

“The minimum amount of total assets of the foreign bank and the insurance/reinsurance organisation must be not less than $25 billion, whereas the minimal amount of deposit which can be accepted from natural persons by foreign bank branches must be not less than $120,000,” she said.

Aitzhanova added that two and a half years after WTO accession, Kazakhstan will eliminate the 49-percent limitation, with the exception of Kazakhtelecom, on foreign participation in the telecommunications sector.

The minister placed great emphasis on granting the status of a country with market economy. Volkov added Kazakhstan is waiting for the EU position on this issue.

“This step is important for trade investigation,” said Aitzhanova.

The main goal of WTO accession is improving the country’s investment climate, officials said. Thanks to targeted efforts to enhance the climate over the past 10 years, the inflow of foreign direct investment to Kazakhstan exceeded $200 billion overall. Moreover, in 2014 the country joined the top 30 countries with the highest volume of attracted net foreign direct investment.