WTO (year of membership)
On January 26, 1996, Kazakhstan sent a formal application for accession to the WTO Secretariat and in February 1996, Kazakhstan was granted observer status in the WTO. In the same year, the Working Group on Kazakhstan's accession to the WTO was established, which included 52 WTO members at the time of completion of the accession negotiations. On November 30, 2015 Kazakhstan officially became the 162nd member of the WTO, after ratifying the package of commitments in the Parliament of the Republic of Kazakhstan, signing the Instrument of Acceptance and its deposition with the WTO Secretariat on November 1, 2015. On October 19, 2016, Kazakhstan was also granted observer status in the WTO Committee on Government Procurement. As a WTO member Kazakhstan has joined the negotiating Group of Article XII Members of the Marrakesh Agreement establishing the World Trade Organization and the regional Asian Group of Developing Countries. Kazakhstan continues to comply with its obligations within its membership in the WTO, promptly sends the necessary notifications to the Secretariat and is actively involved in the work of various committees of the organization.
Customs legislation
On January 1, 2010, Kazakhstan adopted the unified customs tariffs and non-tariff regulations of the Russia, Belarus, and Kazakhstan Customs Union (CU), a legal framework of Eurasian Economic Union (EAEU). The CU implemented the new common Customs Code and abolished internal customs borders in July 2011. Kazakhstan's customs valuation rules largely conform to the WTO Valuation Agreement, and the country has adopted HS 96 as its tariff nomenclature.
Tariff rates changed slightly due to the WTO membership transition, however, the average final bound tariff of Kazakhstan will be 6.9%, while for the rest of the CU countries are expected to be at the level of 7.8%. Kazakhstan continues to maintain tariff-rate quotas (TRQs) on imports of poultry, beef, and pork, as part of its obligations within the CU. Precious metals and stones, encrypted technologies, documents from national archives, and items of cultural value are among the products now subject to export licensing. Kazakhstan will remove the requirement on import licensing for alcoholic beverages as a result of Russia’s accession to the WTO.
The Law on Investments provides customs duty exemptions for imported equipment and spare parts, but only if Kazakhstani produced stocks are unavailable or not up to international standards. In addition, imported equipment and spare parts designated for priority investment projects under the governmental industrialization program are exempted from customs duties.
Other reforms allow foreign citizens to import and declare goods at a port of entry without utilizing domestic customs brokers. Previously, foreign citizens that wished to import goods into Kazakhstan were required to have a Kazakhstani partner. Notwithstanding this reform, foreign citizens may still be required to have domestic customs brokers in order to file electronic customs declarations, unless they have software compatible with the new CU computer system.
Foreign firms can import some items for their own use duty-free including equipment and spare parts imported to implement an investment project if this equipment is unavailable on the territory of Kazakhstan. Generally, Customs requires that imported goods be placed in a temporary storage warehouse operated by a customs-licensee pending clearance - a procedure that importers claim can add significant costs and delays to customs processing. Implementation of regulations allowing periodic declarations remains problematic. Foreign entities cannot deal directly with customs officials in Kazakhstan and are legally required to use services provided by licensed customs brokers having the right to operate in Kazakhstan.
Tax regimes
The taxation regime in Kazakhstan is regulated by the Tax Code which was revised and established in 2009. It is considered to be relatively simple in the way it has been drafted, and the taxation framework is based on a self-assessment regime with tax inspections and taxpayer audits undertaken according to a risk-based sampling approach. Ambiguity in local interpretation of both the Tax Code and international taxation principles have created complexity for Kazakhstan taxpayers and non-residents. Currently, there is no extra-statutory guidance to allow for the appropriate interpretation of domestic and international tax laws and there exist inconsistencies in the application of provisions between various tax authorities and regions. Because of this, it has been a challenge for local and international investors to achieve stable and predictable tax compliance in Kazakhstan. In addition to the measures stated in the formal tax code (see link below) Kazakhstan has also entered into double tax treaties with more than 40 countries. These treaties allow tax relief for some countries by exempting or reducing tax rates applied to income generated in or flowing out of Kazakhstan.
Link to Kazakhstan Tax Code in English - http://adilet.zan.kz/eng/docs/K080000099_
Regulatory framework (investors’ protection)
Kazakhstan has established all the necessary legal framework for investment activities. In 2003, the Law on Investments was instituted to fully regulate the legal and economic framework to stimulate investment. The law, according to international experts, is one of the best laws in the field of investments among the countries in transition. Currently, the World Bank has ranked it as number one in the protection of minority investors. The law guarantees the full protection of the rights of investors and the stability of contracts. It is also very clear in regards to the state bodies in relation to investors (free movement of capital, repatriation of capital, freedom of use of profits, the right of private ownership of land, including for foreign companies). It is important to note that the measures of state support of investments shall be equal both to domestic and foreign investors. 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 for compensating for the losses is defined under the civil legislation of Kazakhstan. In addition to these steps to protect investors The Republic of Kazakhstan also guarantees the stability of the terms of agreements signed between investors and state authorities of Kazakhstan, except in the event of agreements being amended by mutual consent.
GDP annual growth rate
The current Gross Domestic Product (GDP) in Kazakhstan is estimated to be worth 164.3 billion US dollars in 2017. This is a 16 billion US dollar increase over the 2010 GDP of 148.05. The GDP value of Kazakhstan represents 0.26 percent of the world economy and had an average GDP of 83.66 USD Billion from 1990 until 2017. Kazakhstan's GDP reached an all-time high of 236.60 USD Billion in 2013. The expected growth rate of the GDP in Kazakhstan is expected to be 165.30 USD Billion by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the Kazakhstan GDP is projected to trend around 220.00 USD Billion in 2020, according to econometric models.
Income growth
Kazakhstan's Annual Household Income per Capita reached 3,001.06 USD in Dec 2017. In 2010 Kazakhstan's Annual Household Income per Capita was slightly higher at 3,158.00 USD, peaking in 2013 at 4,453.00 USD before dropping down to the current level. From Dec 2010 to Dec 2017, the average value was 3,071.23 USD. The Agency of Statistics of the Republic of Kazakhstan provides Average Household Income per Capita in local currency. The National Bank of the Republic of Kazakhstan average market exchange rate is used for currency conversions. Household Income covers Household Money Income only.
Main investors and trading partners
Currently, only 10 states account for 92% of foreign investment in Kazakhstan. During the first six months of 2018, the top ten investor countries financed projects worth USD $11.3 billion. The top ten countries included (ranked in order of investment levels): Netherlands, USA, Switzerland, Russia, Belarus, China, France, Great Britain, Korea, and Japan. The rates of gross flow of direct foreign investment are expected to grow by 26% (of the 2016 level) by 2022, and its percentage of GDP is expected to be at the level of 19%, (since it was 16.5% in 2018). The number of foreign investors is also expected to rise by 50% over the next 3 years.
Currently, Kazakhstan is ranked as the 53rd largest export economy in the world and the 58th most complex economy according to the Economic Complexity Index (ECI). Top export partners include: China ($5.86B), Russia ($4.73B), France ($3.37B), the Netherlands ($3.22B) and Germany ($1.92B). While top import origins are Russia ($11.6B), China ($5.21B), Germany ($1.54B), the United States ($1.19B) and Italy ($886M).
Credit Rating
Most credit rating systems like Standard & Poor's, Moody’s and Fitch’s have given Kazakhstan a BBB or Baa3 rating stating the current creditworthiness has a stable outlook. Current ratings are an improvement over the period 2014-2016 and are similar to the ratings received in the period 2010-2013.
Inflation rate
In 2019, Kazakhstan ranked number 5 in the world by yearly inflation rate. The Monthly inflation rate was 0.50% in January 2019. That is 0.20 less than it was in December 2018 and 0.10 less than in January 2018. At the same time, 2019 year to date inflation rate is 0.50% and year over year inflation rate is 5.32%. The consumer price inflation has remained unchanged at 4.8 percent year-on-year in March 2019, which is the lowest level since September 2015. In Kazakhstan, the main components of the consumer price index are: food and non-alcoholic beverages (34 percent of the total weight); housing, water, electricity, gas and other fuels (18 percent) and clothing and footwear (12 percent). Transport accounts for 9 percent; household equipment for 5 percent; recreation and culture for 4 percent and alcoholic beverages and tobacco for 4 percent. Others include: miscellaneous goods and services (3.9 percent); health care (3 percent); communications (2.9 percent); education (2.7 percent) and restaurants and hotels (2 percent).
Unemployment Rate
As of March 2019, Kazakhstan's Unemployment Rate was 4.8%. From 2010 to 2019 the average unemployment rate was 5.137. The data reached an all-time high of 12.9 % in Jan 2001 and a record low of 4.8 % in Mar 2019. The data is reported by The Agency of Statistics of the Republic of Kazakhstan. Monthly Earnings of Kazakhstan stood at 455.63 USD in Mar 2019. The country's Labour Force Participation Rate remained the same rate at 70.40 % in Dec 2018.
Doing Business Index (The World Bank) http://www.doingbusiness.org/en/rankings
In 2019, Kazakhstan jumped from 36th to 28th place in the World Bank Doing Business Report putting it in the top 30 countries according to the report which covers 190 countries. Overall, significant improvement was seen across all criteria, especially in enforcing contracts, starting businesses and trading across borders. However, the indicators for ease of international trade and access to financing were still low. Kazakhstan ranked 4th overall in enforcing contracts, improving its place to two points compared to last year. This was due to a simplifying of the expansion of court automation and the introduction of an electronic case management system making possible the generation of performance measurement reports. In starting new businesses, Kazakhstan improved from 41th to 36th place. Adjustment to simplify the process of starting a new business by cutting post-registration procedures, such as tax registration, social security registration and licensing were made. And in international trading, Kazakhstan improved from 123rd to 102nd place. Introducing the ASTANA-1 IS electronic customs declaration system and reducing customs administrative fees, has made trade across borders easier by reducing the time and costs of border and documentary compliance for export. In addition to these improvements, Kazakhstan also continues to hold its first-place ranking in protecting minority investors.
Human Capital Index (The World Bank)
Compared globally, Kazakhstan’s HCI value (0.75) is higher than the average for the Central Asia region and its income group. Since 2012, Kazakhstan’s performance in the Index has increased from 0.63 to 0.75. According to the HCI data, currently, 99 out of 100 children born in Kazakhstan survive to age 5 and that children can expect to complete 13.3 years of school by age 18. However, if adjusted by the quality of learning, this is only equivalent to 11.5 years: a learning gap of 1.8 years. In addition to these stats, 80 percent of Kazakhstan’s teenagers (15-years old) will survive until age 60. The majority of children (92 out of 100) are considered not stunted, with only 8 out of 100 being stunted and at risk of cognitive and physical limitations.
The future HCI outlook for Kazakhstan looks promising for a continued increase in HCI scores as improvements continue to be made in the quality of education and health care.
Since its independence in 1991, Kazakhstan has made significant progress toward creating a market economy and has achieved considerable results in its efforts to attract foreign investment. As of January 1, 2018, the stock of foreign direct investment in Kazakhstan totaled USD 161.7 billion. The majority of foreign investment is in the oil and gas sector, and the United States is the leading sources of investment capital. As of January 1, 2018 the USA had invested around USD 27.28 (FDI stock). Located at the crossroads of Europe and Asia, the country has also benefited from huge investments made by China through its China's Belt and Road Initiative program to improve its transport infrastructure.
While Kazakhstan’s vast hydrocarbon and mineral reserves remain the backbone of the economy, the government continues to make incremental progress toward its goal of diversifying the country’s economy by improving the investment climate. Kazakhstan’s efforts to remove bureaucratic barriers have been moderately successful and the World Bank in 2018 ranked the country 36 out of 190 in its annual Doing Business Report. The government maintains an active dialogue with foreign investors, through President Nazarbayev’s Foreign Investors Council, the Prime Minister’s Council for Improvement of the Investment Climate, and the Investment Ombudsman. Kazakhstan joined the WTO in 2015 and began to lift local content requirements per its WTO accession commitments. In June 2017, Kazakhstan joined the OECD Declaration on International Investment and Multinational Enterprises and became an associate member of the OECD Investment Committee.
Despite institutional and legal reforms, concerns remain about corruption, bureaucracy, and arbitrary law enforcement, especially at regional and local levels. The government's tendency to challenge contractual rights, legislate preferences for domestic companies, and intervene in companies' operations continue to discomfit foreign investors. Foreign firms cite the need for improved transport and logistics infrastructure, a more open and flexible trade policy, and a more favorable work-permit regime.
John Litvak, Chief Economist of the World Bank for Kazakhstan has stated that Kazakhstan has some significant advantages, compared to other countries in the region. Currently, there is a relatively high level of political stability and a rich endowment of the natural resources within the country. But with the interest of foreign investors focused mainly on the raw material sectors, the seeking of competitive niches in the Kazakhstan processing industry continues. Currently, there is an insufficient number of foreign investors present in this sector but it is expected to change with China preparing to start a large number of manufacturing projects over the next five years.
Kazakhstan has the 53rd largest export economy in the world and is ranked 58th for the most complex economy according to the Economic Complexity Index (ECI) which gave it a score of of 0.088. In 2017, Kazakhstan had a positive trade balance of $13.6 billion in net exports and exported a gross total of $44.1 billion. Leading export destinations include China ($5.86B), Russia ($4.73B), France ($3.37B), the Netherlands ($3.22B) and Germany ($1.92B). Products exported to these countries are very diverse with the top exports being Crude Petroleum ($19.9B), Refined Copper ($3.05B), Petroleum Gas ($2.4B), Ferroalloys ($2.28B) and Radioactive Chemicals ($1.82B). Below is a graph depicting the levels of exports over the past 10 years. Currently, Kazakhstan exports over 101 products with revealed comparative advantage.
In 2017 Kazakhstan imported $30.5 billion, making it the 63rd largest importer in the world. During the last five years the imports of Kazakhstan have decreased at an annualized rate of -7%, from $43.9 billion in 2012 to $30.5 billion in 2017. The most recent imports are led by Refined Petroleum which represent 3.58% of the total imports of Kazakhstan, followed by Packaged Medicaments, which account for 2.57%. Its top imports are Refined Petroleum ($1.09B), Packaged Medicaments ($783M), Broadcasting Equipment ($758M), Cars ($575M) and Valves ($411M). The largest import origins are Russia ($11.6B), China ($5.21B), Germany ($1.54B), the United States ($1.19B) and Italy ($886M). The graph below depicts the fluctuation of imports over the last 10 years.
There are 14 distinct districts in Kazakhstan. Each of the areas are managed by regional governments and have unique investment opportunities. Across all regions, the total value of new investment as of October 2018 was a reported $12.3 billion. Key sectors for investments included: mining ($6.7 billion in investments), transport ($393.3 million), finance and insurance ($359.5 million), information and communications ($124.2 million) and trade ($5.47 million). Above is a map showing the individual districts and below is an overview for each of the five general regions in Kazakhstan.
North Kazakhstan - North Kaz, Akmola, Kostanay, Povladar
This region includes the special economic zones: Astana Technopolis, Astana-New City, and Pavlodar.
North Kaz: Capital - Petropavl • Population - 558,700
The North Kazakhstan region holds great opportunities for future investors being rich in natural resources. Main industries for foreign investment and development include agricultural and processing industries such as: agro-industrial complex, machine-building, food processing industry, wood processing, mining and processing of mineral raw materials with high added value, transport infrastructure; creation of tourism clusters, development of the metallurgical complex, production of modern building materials and the development of high-tech construction productions, and energy-saving technologies. As of 2016 there are were a total of 39 new investment projects established in the region in the following categories: mining industry (2), agro-industrial complex (15), transport and logistics/tourism (2), chemical industry (11), light industry (2), energetics and RES (3), construction industry (3), and mechanical engineering (1).
Akmola: Capital - Kokshetau • Population - 748,300
Geographical location and economic conditions make Akmola one of the leading regions in Kazakhstan for the production and processing of agricultural products. Currently, Akmola produces one-fourth of the nations total wheat volume. The region has great economic potential and is rich in natural resources. The region has explored reserves of gold, silver, uranium, molybdenum, industrial diamonds, dolomite, kaolin, iron ore, coal, and other minerals and building materials. The measured value of balance reserves is greater than 20 billion USD, and the estimated resource value exceeds 100 billion USD. Priority areas for the development are the agricultural sector, non-ferrous metallurgy, mechanical engineering, and enterprises for the processing of agricultural raw materials. The region is also interested in the development of advanced technologies, and new industries and the development of social service infrastructure.
Kostanay: Capital - Kostanay • Population - 900,300
Kostanay region is rich in natural resources and minerals which include: magnetite and oolitic iron ores, bauxite, lignite, asbestos, refractory and brick clay, flux and cement limestone, glass sand, building stone, significant above and below ground water sources, 19 bauxite deposits, 7 gold, and one each silver and nickel deposits.
Povladar: Capital - Pavlodar • Population - 754,739
Pavlodar region is one of the main industrial regions of Kazakhstan. It contains an industrial complex that is the largest industrial producer in the CIS. It includes plants which are actively engaged in the development of minerals and hydrocarbons. Agriculture also plays a considerable role in the region. The primary crop grown in the region is wheat – about half of the arable land, while 15-17% of the remaining crops consist of other grains, potatoes, vegetables, and watermelons. The industrial potential created in the region has caused the expansion and development of transport and communication services making the region a transport and communication center. Kazakhstan oil pipeline originates in the southern part of the country (Shymkent), as well as transmission lines supplying power to different regions of Kazakhstan and Russia. The Pavlodar region is strategically located for enabling the transportation of materials and products to neighboring countries and local areas within Kazakhstan. Railroad track connect the region with Russia, and central and southern Kazakhstan. Kazakhstan has put great effort into the development of SEZ “Povladar” and has seen great interest from Chinese investors in the start of numerous projects across the region ranging from Auto manufacturing to tomato products and nylon production.
South Kazakhstan - South Kaz, Zhambyl, Kyzylorda
This region includes the special economic zones: Ontustik, ChemPark Taraz, and Turkistan.
East Kazakhstan - East Kaz, Almaty
This region includes the special economic zones "Tech Garden" (PIT), ICBC Khorgos, and Khorgos-Eastern Gate.
Central Kazakhstan - Aktobe, Karagandy
This region includes only one special economic zone: Saryarka.
West Kazakhstan - West Kaz, Atyrau, Mangystau
This region includes the special economic zones: "National Industrial Petrochemical Technopark" (NINT), and Aktau Seaport.