- Transit location
Kazakhstan is located in the heart of Eurasia, at the heart of the major transport networks. Principal transcontinental routes go through Kazakhstan, connecting the Asian-Pacific region, the Near and Middle East, and Europe. Kazakhstan is a strategic partner for many countries.
The unique geographical location of Kazakhstan, at the Europe-Asia crossing, guarantees a transit traffic among Europe and Asia's large markets having 0,25 million of the whole world residents.
The railway is the main method of transport carrying 80-90 % of goods’ turnover of all types of general transport. By operational length the railway is 3rd after Russia and Ukraine.
Traffic by the Northern Corridor will be mainly expanded through a growth of trade flows between Asia and Europe (specifically, China and Europe). With that end in view, a work package has been carried out on upgrading trans-shipping facilities at the Druzhba border station and on improving the Aktogai-Druzhba railway section.
Traffic between South-East Asia and Central Asia via the Central Corridor is rather moderate. But it is extremely vital for Kazakhstan to hold its positions in these shipments. In order to retain and expand international transit traffic by this corridor, building of a direct railway from Uzbekistan to Kashgar (China), where irreproachable transport service will be secured, is planned.
The Central Asian Corridor refers to rare railway directions in Kazakhstan that convey transit cargoes in volume. It accounts for the bulk of shipments between Western Kazakhstan and its other regions.
The function of this direction in the future will primarily depend on use of the alternative routes by Central Asian countries namely via Beineu-Makat and the Tashkent-Ashgabat-Turkmenbashi-Baku-Tbilisi-Poti route of TRACECA.
The Western Corridor mainly oriented at transit shipments between Central Asian countries. Intensity of traffic by the Western corridor is expected to increase through development of transport communication via the Aktau port.
Kazakhstan's location at the centre of Eurasia determines that the market in air transport is concentrated to and from Europe and Southeast Asian countries.
There are three main flight categories:
- within Kazakhstan;
- northwards, across Russia, Mongolia and China;
- southwards, across the Black Sea, Iran and Turkmenia.
The bulk of air traffic is concentrated on routes passing across Russian, Mongolian and northern Chinese air territory.
Today, 22 airports are operating in the country, six of which are private (Almaty, Uralsk, Ekibastuz, Kokshetau, Taraz, and Urdjar). Annually is observed growth in passenger and cargo transportation on domestic flights.
The volume of sea transportation between the CIS and Kazakhstan is growing. Taking into account existing traffic in the Caspian, Black and Mediterranean Seas through the Volga- Baltic Sea and Volga- Don canals, the volume of sea transport operations should increase considerably.
Road transport plays an important role in the growth of international trade relations. Over 100 international passenger traffic routes have been opened and are functioning at the present time, connecting Kazakhstan with the CIS and more distant countries. There is a flow of Chinese goods in the direction of Kyrgyzstan, Uzbekistan, Russia and Ukraine.
Opening a road transport route to the port of Aktau will enable Chinese goods to be transported to Azerbaijan and Georgia.
Rich natural resources
Kazakhstan is among top world countries in the amount of proven reserves of oil and gas, and the potential for new findings. Kazakhstan's territory contains four different geological basins. Those basins remain largely unexplored even though current exploration activity is high. Almost three quarters of all the Kazakhstan reserves are in two giant fields-the Tengiz (oil) and Karachaganak (gas). Most of the fields in the northern part of the basin, such as Karachaganak, contain mostly gas with a small amount of oil.
Among other important resources are copper in the central areas and in Aktyubinsk oblast; lead, zinc, and silver in the Rudnyy Altai area, the Dzungarian Alatau and Karatau spurs; tungsten and tin in the Kolbin Ridge and southern Altai; chrome ore, nickel, and cobalt in the Mugozhar Hills; titanium, manganese, and antimony in the central regions; vanadium in the south; and gold in the north and east. Processing facilities at Aktau produce large quantities of uranium mined in the Mangghyshlak area. Much iron ore comes from Karaghandy and Kostanay, and coal from the Karaghandy, Torghay, Ekibastuz, and Maykuben basins. The country numbers 10 coal fields of bituminous and brown coal, 155 deposits all in all. Molybdenum, tungsten, phosphorite, copper, potassium, cadmium and bauxites add to the list of Kazakhstan's mineral resources.
Sustainable high economic growth
For the period from 1998 to 2002 the GDP growth in Kazakhstan composed 40%, growth of industrial production – 48%, agricultural products – 47%, construction – 87%. During the first 9 months of 2003 the GDP growth reached 9.1%, industrial production has increased by 7.8 % and agricultural production – by 3,7%.
Since 1998 Kazakhstan has maintained a positive trade balance, with the export component growing steadily.
Qualified labour force
The workforce in Kazakhstan is highly qualified. They have a generally high level of skill in a wide range of industrial, professional and knowledge-based service industries.
In 2002 the economically active population numbered 7.4m in total, 56.4 % of this come to urban population. The following regions saw the largest EAP numbers: Southern Kazakhstan region, Almaty region, Karaganda region, Eastern Kazakhstan region and the city Almaty.
For the last three years the higher education institutes of the Republic of Kazakhstan trained more than 150 thousands specialists of high qualification on different specialities. There are 288 students per 10,000 people, whereas the number is 223 in Germany and only 195 in Hungary.
Totally in 2002 the colleges have trained 50,907 specialists.
Nowadays around 4,000 citizens of the Republic of Kazakhstan study in 35 countries of the world and the cooperation geography in the field of education and science expands yearly.
The international scholarship, Bolashak, is annually provided to the talented youth of Kazakhstan by the decision of the Republican Commission on training Kazakh human resource in the best universities abroad.
Since 1994 around 400 students successfully graduated from universities abroad. The young generation of Kazakhstan, within the frames of this program, studies in the best universities of Great Britain, Canada, Italy, Russia, the USA, Germany, France, Japan, Australia.
The English language has become more and more popular in Kazakhstan and a large number of Kazakh people speak and use this language in their work.
Well-developed financial market
This segment of Kazakh economy has left all the other sectors far behind, both levels of development and in scope of activities. In December 1996, second-tier banks in Kazakhstan began to adopt international standards of performance. The Transition Programme also helped to make an easier and more specific appraisal of the Kazakh banking sector possible, in the light of international banking practice.
The measures devised by the Government and the National Bank to strengthen the banking sector have brought about a measurable improvement. Today many Kazakh commercial banks became players in the international capital markets.
In addition, Kazakhstan has become the leader among the CIS and Baltic countries in terms of average total capital per bank (about US$12 million in 2000 and US$27 million in 2002).
To date, the Kazakh banking sector is almost entirely privately-owned. Halyk Bank, which holds 41.1% of all personal deposits in the country, was made a private operator, from as early as 1999 (50% + 1 share). Currently only two banks, the Export & Import Bank of Kazakhstan and the Development Bank of Kazakhstan, remain under 100% government control; discussion is under way on merging them into a single Development Bank to be devoted to infrastructure development.
The creation of a stable food security system in Kazakhstan is a priority in government aid to the agricultural sector for 2004-2005.
The key measure for achieving this goal is introducing private ownership of agricultural land that has become available with the adoption of the new Land Code in 2003.
In the plant growing sector, it has been planned to change the structure of areas under crops taking into account scientific farming principles and regional specialization, and to reform the seed-growing system.
To this end, the Government is to support the development of livestock breeding, specialization by breed, sector and region, and large- and medium-scale stock breeding.
Another priority in agricultural development is the provision of adequate machinery to farm enterprises. At the initial stage, it is necessary to ensure the efficient implementation of pilot projects to establish service centres and machine and tractor stations, with state participation in these enterprises and subsequent sale of the state share.
The formation of effective veterinary, plant protection and quarantine, and product processing systems that meet international standards is also essential for further development of Kazakhstan’s agriculture.
Industrial and Innovation Development
For further balanced development of industries the Industrial and Innovation Development Strategy of Kazakhstan for 2003-2015 have been developed and now is under implementation.
The main goals of the Strategy are:
- encouraging establishment of science intensive and high-tech export-oriented productions;
- diversification of export potential of the country targeting goods and services with high added value;
- transition to the international quality standards;
- enhanced integration into the regional and global economy, involvement into the scientific, technical and innovation world.
The appropriate conditions for increase of investment inflow into raise of industrial technological level and launching of science and high tech industries have being secured.
Three technological parks as centres of development of information technologies, radio electronics, bio-technologies, nuclear, cosmos technologies are established in Kazakhstan.
Multinational Investors presence in Kazakhstan
Since 1992 the foreign companies-investors began to work actively on Kazakhstani market. Now multinational companies such as LG Electronics, Efes Invest, BAE Systems Royal Dutch Shell, Chevron Texaco Overseas Company, Eni, ExxonMobil, Lukoil, AES Suntree Power Ltd, ABN AMRO, TotalFinaElf, BG, BP, CNPC, Philip Morris, Coca-Cola, Access Industries, Maersk Olie Og Gas AS, Mitsubishi Corporation, SAMSUNG Corporation and others successfully operate in Kazakhstan.
Attracting and effective use of foreign investments is one of the main directions of a mutually beneficial trade-economic cooperation of Kazakhstan with other countries.
Kazakhstan has been targeted for the creation of favourable conditions for successful work of local and foreign investors in the Republic, the promotion of investments in non raw-material production and strengthening cooperation with the international financial organizations.
The Law on Investments that has been adopted on 8 January 2003, grants investment incentives for investors in priority sectors of the Kazakh economy.
This Law envisages and guarantees equal conditions and equal preferences to foreign and local investors. The equality of foreign and local investors guarantees support concerning nationalization and requisition, at control and supervision to be carried out only by authorized bodies, at investment disputes settlement, at use of profits, and at compensation for losses, caused by actions of the state bodies and officials.
The law also includes provisions concerning standards of compensation for investor losses. Under these provisions Kazakhstan will give compensation in full for force majeure losses. The procedure of compensating losses is defined by the civil legislation of Kazakhstan.
The law envisages settlement of investment disputes by talks, in the national court of the republic of Kazakhstan and, it is meaningful, in international courts of arbitration.
The norms guaranteeing stability of terms of contracts concluded between authorized state body and investors are introduced in the law.
According to the new law, the state investment promotion and support measures are reflected as investment preferences. These comprise investment tax exceptions, exemptions from customs duties and the provision of state grant in kind.
Investment tax preferences include:
- Granting the right to deduct the cost of the fixed assets bought as a part of the investment project
- Exemption from property tax
- Exemption from land tax
Customs exemptions apply for newly imported equipment and spare parts essential for implementing the investment project.
State grants in kind means free transfer of state property to the investor, if it is necessary for the investment project. The value of the state grant in kind will not exceed 30% of the volume of capital investment.
ASTANA, THE NEW CITY
The state programme for the socioeconomic development of the city of Astana to 2005, which was approved by Decree # 574, of 19 March 2001, of the President of the Republic of Kazakhstan, outlines a series of measures designed to assist the harmonious development of the capital city as an administrative and business centre, and to strengthen its consolidating role in the country’s social, economic and cultural life. As a more remote prospect, administrative, business, cultural, scientific and educational centres will be built in Astana to the standards of the capital cities of developed countries.
To assist in reaching the goals set, another presidential Decree, # 645, of 29 June 2001, On Founding The New City of Astana - Special Economic Zone, was issued, which provides for the setting of such a zone for the period from 1 January 2002 to 2007.
The Regulations of The New City Astana – Special Economic Zone stipulate that an executive body be formed to govern the zone’s operation. Could you tell us about the functions and powers of this body?
The SEZ’s executive body is its General Directorate, which has the following functions:
- to design and implement the strategy and programme of the SEZ development;
- to facilitate interaction between public bodies and other organisations in the SEZ;
- to participate in the development of long-term and annual plans and development programmes for the left-bank part of the ity;
- to attract domestic and foreign investments and credits;
- to maintain a listing of construction sites in the SEZ;
- to monitor investment activity in the SEZ.
Why does the special zone comprise only six land plots on the left-bank part of Astana?
The boundaries of the new SEZ have been determined in consideration of the past experience of similar zones in the country, and the practicalities of its operation, including factors and conditions which determine the efficiency of a SEZ. Indeed, the New City of Astana – zone consists of six land lots totalling 1,052.6 hectares, and has a perimeter of 36.8 km. Given the total area of the capital city of 71,000 hectares, no problem will be created for traffic outside the SEZ. On the other hand, the limited size of the land plots ensures targeted application of tax preferences. Thus, the relatively confined area will serve as a functional model of socioeconomic development in the capital city, where market mechanisms and the state’s priorities will be given due attention.
What does the status of a special economic zone imply for investors and general public?
According to Article 71 of the Act On Customs in the Republic of Kazakhstan, the status of a free customs zone allows foreign-made goods to be kept and used in the area free from customs duties, taxes and other regulatory measures. Further, in line with Article 82-1, this applies to the following items which might be moved to the SEZ:
- building machinery and equipment;
- building goods which can be totally consumed within the SEZ;
- goods and equipment necessary for construction and commissioning, as per design estimates.
To enable efficient control over the placement and use of goods within the SEZ, it will be encircled with a metal fence built along its perimeter, with checkpoints equipped with bars and gates.
What tax preferences are being granted to investors in the SEZ?
Within the SEZ, investors will enjoy tax preferences as stipulated by Article 138, Section 5, of the Tax Code of the Republic of Kazakhstan, which was adopted on 12 June 2001 and will be effective from 1 January 2002.
Tax preferences for investors include exemption from the tax on property of legal entities and individuals, levied on the depreciated cost of buildings and facilities constructed in the SEZ during its operation.
Additionally, according to Article 123, Paragraph 2, of the Act On Taxes and Other Statutory Payments (with amendments of 12 July 2001), during the exemption period, the tax will not be levied on sites within the SEZ where infrastructure facilities, administrative or residential buildings, complete or under construction, are located.
The preferences in respect of VAT apply to taxpayers registered in the city of Astana, in line with Act #223-II, of 5 July 2001, On Amendments to Certain Acts of the Republic of Kazakhstan Regarding the New City of Astana – Special Economic Zone. This category includes legal entities, individuals and non-residents operating in the Republic of Kazakhstan through their permanent representatives.
Exemption from VAT on the turnover of goods and services is expected to lead to lower building costs. In addition, goods and equipment to be sold within the SEZ will be taxed at the zero rate, which means that the manufacturer does not pay VAT and is entitled to reimbursement of VAT paid by him to suppliers.
To become eligible for the above policies, an investor has to register with the tax authorities of Astana.
Apart from tax and customs preferential policies, further stimuli are envisaged to encourage investments in building activities on the left-bank side of Astana, which include the installation of water, sewer, heating and drainage systems, and electric substations, all being financed by the city budget.
An automatic telephone exchange for 4,000 subscribers was built recently and distribution telephone networks are currently under construction.
What guarantees against changes to the legal status of the SEZ or its early closure are envisaged for investors?
In accordance with Article 6 of the Act On Special Economic Zones in the Republic of Kazakhstan, in the case the SEZ is closed before the stipulated closure date, or its legal status changes, which includes any change in its boundaries, investors will be entitled to continue their operation in the SEZ under the conditions as of the date the respective investments were made, up to the initial closure date, but not for longer than 10 years. The latter period will be counted from the date of changing the SEZ status onwards. These guarantees also apply to any changes in the customs regulations of the Republic of Kazakhstan governing the import of equipment and materials to be processed (excluding ethyl alcohol).
What public body is entitled to give the right to build in the SEZ?
The right to build in the SEZ can be granted by the Akimat (the city government) of Astana. Building will be carried out in compliance with Astana’s general development plan and the detailed plan of the left-bank part. Building projects to be financed from the local and Republic’s budgets will be put up for tenders.
For detailed information about The New City of Astana – Special Economic Zone, visit web site at: www.astana.dan.kz/sez