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Being Closer to the Investors

The government sets focus of work with investors on the external level. In order to attract foreign companies to the projects  in our country, Kazakhstan sends overseas special ambassador advisers. Vice Minister for Investment and Development of the Republic of Kazakhstan Yerlan Khairov was interviewed by our magazine on this project.

Yerlan Kartayevich, tell us please what are the key indicators in the field of attracting investments at the end of 2015?

Due to the focused policy implemented by the Head of the state, the overall amount of foreign direct investments (FDI) in our economy over the last 11 years has exceeded $222 billion.

If we talk about the last year results, the amount raised over that period is equal to $14.8 billion. The statistical data indicates that investors are interested first of all in the oil and gas sector as well as the mining and smelting industry. If we compare these figures to the results of 2014, we will see that investments in these sectors reduced significantly: in the mining industry – by 58% and in the crude oil production – by 62%. Besides, investment in trade reduced by 47%.

The reason for this is quite clear – the drop in prices for our main export commodities and devaluation of the national currency. In addition, foreign investments are currently overflowing into developed (protected) regions, such as the USA and Europe. Therefore, the current economic situation could not but affected the investment statistics of Kazakhstan. It is fair to say that this situation is quite consistent with the global trends. According to the UNCTAD, in recent times the FDI inflows have decreased significantly in a number of developed and developing countries and regions. For example, in Canada – by 16%, Australia – by 33%, Chile – by 38%, Africa – 31%, Latin America – by 11%, and in Russia – by 92%.

Of course, besides the mining sectors, there is a slight decrease in the volume of foreign direct investment in our processing industry. However, our target industries are still growing. The volume of foreign investments in the oil processing industry increased by 81%, in the engineering industry – almost 7 times, and in the food and beverage production – by 30%.

Last year, the countries that took leading positions in terms of investment in Kazakhstan included the Netherlands ($3.7 billion), the USA ($1.8 billion), Switzerland ($1.4 billion), France ($674 million) and Great Britain ($620 million).

I would like to emphasize that despite the situation in the global economy, Kazakhstan remains a leader among Central Asian countries in the field of attracting FDI.

Taking into account the industrialization policy, which investors does Kazakhstan need first of all?

Within the framework of implementation of the second five-year plan, the priority is given to investors interested in implementing the projects in the following 6 specific industries: metallurgy, oil refining and petrochemical industries, food and chemical industries, machine building and production of construction materials.

We will be focused on these sectors, although it does not mean that other sectors, such as, for example, consumer goods industry, will not receive government support.

A list of projects that require capital investment, is currently available at the website: invest.gov.kz. At the same time, we understand that attracting investment should be followed by a transfer of innovations and knowledge. Therefore, the priority is given to those companies and institutions that are carriers of know-how, which are necessary for our enterprises. At the same time, there will be a more comprehensive transfer, the effect of which will be both purchase of new technology and transfer of intellectual property and design documentation to businesses as well as staff training, etc.

On the instruction of the Head of the state, we have started working with major investors, including transnational corporations. As of today, 29 transnational corporations included in the Global 2000 list have been involved in economy of Kazakhstan. They include: General Electric, Toyota Motor, Chevron, Total, Airbus Group, Hyundai Motor, Sanofi, Rio Tinto, Danone, KIA Motors, HeidelbergCement, Alstom, Metro Group, Solvay, LG Electronics, Peugeot, Cameco and others. For example, last year we started 4 new enterprises with the participation of Tikurilla, General Electric, Halliburton and JAC (the first stage) with the total amount of 25 billion tenge. Another 65 projects are under development involving transnational corporations from the following countries: the USA, France, Italy, UK, Japan, UAE, Germany, Turkey and others.

This year we are planning to implement projects with the participation of "anchor investors" and transnational corporations (JAC, Hikma, Carmeuse Group, Cremonini, Peugeot Citroën, IVECO, Tenaris) in the total amount of 78 billion tenge. These projects will be implemented in the following industries: pharmaceutical industry, agricultural industry, mining and metallurgical complex, chemical industry and production of construction materials.

We continue our active cooperation with the EU, Turkey and the Arab countries. Iran is a new direction.

We do not forget about the existing investors and use our best efforts to solve their problems. As a result, in 2015, 6 companies – Danone, LG Electronics, Galaksi Group, BTM Group, Lotte Group and Coca-Cola reinvested approximately $113 million in their production facilities.

The plans for this year provide for reinvestment in projects in certain industries such as the production of construction materials, transport/logistics, chemical and consumer goods industry as well as agro-industrial complex.

At the beginning of the year, Chinese investors said that they were ready to take part in 52 projects implemented in Kazakhstan. Which of these initiatives have already been implemented?

I should note that investment relations between our countries are maintained at the highest level. This is evidenced by specific agreements reached during the recent visit of the President of Kazakhstan to the People's Republic of China. An appropriate legal base has been created and the Framework Agreement has been signed between the Governments of the Republic of Kazakhstan and the People's Republic of China for strengthening cooperation in the field of industrialization and investment. Our Ministry and the State Committee for Development and Reforms of China hold regular joint meetings on cooperation in this sphere.

Indeed, in December of the last year, during the visit of Prime Minister Karim Massimov to the PRC commercial documents were signed for the implementation of 52 joint projects totalling $24 billion in such sectors as mining-metallurgical and chemical industries, machine building and production of construction materials, energy, transport infrastructure, agriculture and others.

Implementation of 11 of those projects in the amount of $2.9 billion will be started this year, the rest projects will be started in 2017–2022. Besides, Chinese and Kazakh partners are holding active negotiations for implementing 17 promising projects totalling $7.2 billion.

In general, Chinese investors are greatly interested in making investment in the economy of Kazakhstan.

What are the results of ombudsman's work for the last year? What problems have been resolved through this mechanism?

During that time the investment ombudsman considered more than 60 applications relating to taxation, customs regulation, migration, labor relations, construction, licensing, land law and other issues.

Decisions on 20 of those applications were made in favor of investors. For example, assistance was rendered on issues such as the provision of infrastructure, registration of a trademark, expansion of the railway station capacity, inclusion of domestic producers in the register and others.

In addition, having considered 8 problematic issues of a systemic nature the ombudsman developed recommendations for improvement of tax and customs legislation, as well as recommendations in other areas regulating the investment activities in Kazakhstan.

As we know, previously a "single window" principle was applied only to investors who had signed already the valid contracts.

Indeed, a "single window" mechanism used for obtaining public services has been operating since the last year in a pilot mode and only for investors engaged in implementing priority investment projects.

Since 2016 all investors, both domestic and foreign, have a possibility to receive absolutely all public services on the principle of "a single window". Today, we have the results, for example, since January about 350 investors have received consultations and public services. At the central level, the functions of "a single window" are carried by our ministry. Similar "windows" have been established in all regional Public Service Centers, which currently include special investor service sectors – 2 in Astana, 3 in Almaty and 1 in each regional center.

We understand that expansion of the principle of "a single window" will lead to a significant increase in the flow of investors' requests. Therefore, the Investment Committee has started developing an automated system for rendering support to investors. As a result, from the next year they will be able to register themselves, receive information regarding the conditions of public services and keep track of the status of their requests in real-time mode.

In 2017, Kazakhstan is planning to join the OECD Investment Committee. What work is currently being done in this direction?

To solve this problem we are actively working on the implementation of 12 recommendations provided by the OECD experts based on the results of the first review of the investment policy of Kazakhstan conducted in 2011–2012. A detailed plan for improving the investment climate was adopted in February of this year on the instruction of the Head of the state, and this plan includes the main directions that require special attention. Such directions include certain measures aimed to improve the tax and customs law enforcement practice, improvement of procedures for attraction of foreign labor force, expansion of a visa-free regime, simplification of access to land resources and improvement of legislation in the field of public private partnership, protection of intellectual property rights and many other aspects.

Alongside with that, since September of the last year the OECD experts have started preparing the second review of the investment policy of Kazakhstan with the aim to assess the progress achieved by our country in implementing the recommendations.

Following the results of implementing the Detailed Plan and the second Review we will be able to become a member of the OECD Investment Committee and join the OECD Declaration on International Investment and Multinational Enterprises.

 

What are your future plans in the field ofattracting investment?

As you know, the Head of the state announced in his regular Message to the people of Kazakhstan the need for transition to a new investment policy. In this regard, we are currently changing our approaches to interaction with investors.

First, we are transferring the focus of our work to the external level. We have identified 10 priority countries – the USA, Great Britain, Italy, South Korea, Iran, Japan, Germany, France, China and India – to which special investment advisers are sent. This will allow us to contact closely with the companies directly in their home countries and to render assistance in the restructuring of business processes during the project implementation in Kazakhstan. In addition, 5 regional front offices of Kaznex Invest JSC will be opened in the USA, Great Britain, Turkey, UAE and China, which will operate on the basis of a "single window" principle for investors. This is the best international practice, which is used in many agencies to attract investment. Second, the Governmental Headquarters has been established at the central level with the aim to coordinate the implementation of major investment projects with the participation of transnational corporations. The work of the Headquarters is performed with the involvement of international consultants such as BCG, McKinsey, JPMorgan and others.

Third, with the aim to solve promptly the problems at the regional level special councils supervised by regional akims have been established for attracting investments.

In general, our aim is to maintain the pace of growth of investment in the processing sector. It is clear that in the conditions of global economic instability this objective will be quite difficult. Nevertheless, Kazakhstan remains a stable and reliable partner for interested foreign investors, and we are ready to use our best efforts to support them.

 






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