The Association of Investors of Kazakhstan: Our might is in unity, and the path to success lies in our solidarity!
Serik Tulbasov, Chariman of the Board of the Association of Investors of Kazakhstan
In June 2000, the first session of investors of Kazakhstan was held with the participation of members of the Government led by Prime-Minister Kasymzhomart Tokayev, deputies of the Parliament, heads of domestic companies and joint ventures, representatives of banks, investment and pension funds, legal companies and public associations.
Initiated by Kazakhstan’s investors, the session was held with the support of the Agency of the Republic of Kazakhstan on Investment and Kazinvest, the Kazakhstan Investment Promotion Centre.
The forum passed a resolution on the creation of a public non-profit organisation – the Association of Investors of Kazakhstan – which would join together the country’s entrepreneurs in solving the most acute problems, such as the development of joint proposals for the improvement of investment laws, the protection of lawful rights and the interests of domestic investors, and the creation of a favourable business environment for small and medium-sized business, etc.
It is no secret that foreign investors focus their attention on the oil and gas sector, non-ferrous metallurgy, the food industry, power engineering and the financial sector, whereas domestic investors put more funds into processing, house building, the banking sector, the service sector and tourism. However, investment is also needed for other branches of the economy, such as pharmaceuticals and light industry, and agriculture. The market is crying out for the modernisation of its functioning enterprises, which will inevitably cause staff reductions. Only through the development of small and medium-sized business will the employment problem in Kazakhstan be settled and the country’s social stability preserved. This is why support for the entrepreneurship initiative must not only be the basic component of the economic policy pursued by the Government of Kazakhstan, but should also lie in the sphere of the vital interests of large foreign and domestic capital.
Each investor, whether local or foreign, is extremely concerned about the legal framework of its activities. Although the investment laws have largely been formed already, it should be admitted that the imperfection of such laws, and the risks of their changing, combined with political and business risks, corruption, oppressive taxation and bureaucracy, all contrive to worsen the investors’ position in this country. On its way to free development, entrepreneurship is still facing a lot of obstacles, including excessive resolutions, inspections and licensing requirements.
Our Association has the objective of developing proposals for the Government and the legislature in order to improve the conditions for investment and foreign economic activities. It will also have to formulate clear and transparent rules of interaction between entrepreneurs and state officials, which will foster the successful implementation of investment projects.
As a result, members of the Association have formed work groups on legislation and taxation, as well as for the day-to-day operations.
The method of charging tax has become an acute problem for investors today (the most difficult situation is with VAT payments). I do not think that this is a problem for domestic investors only. The high social tax (26%) is also causing great concern. A reduction in the tax burden on the payroll fund would also promote the growth of public employment.
This is why the Association of Investors of Kazakhstan stands for passing a new Tax Code which would decrease the overall tax burden, and would give an impetus to the development of small and medium-sized business.
One of the Association’s work groups has held a meeting and a seminar with representatives of the Committee on Antidumping Control of the Ministry of National Revenue of the Republic of Kazakhstan. In the course of a constructive dialogue, they discussed the threat of dumping for domestic producers, as well as procedures for investigating goods delivered to Kazakhstan at dumped prices. As a result, measures for the protection of competitive domestic producers of goods and services were proposed.
One of the Association’s main concerns is the unification of two laws On Foreign Investment and On State Support to Direct Investment. The Association has already drawn up a number of proposals. The new law should protect local investors, without worsening the investment attractiveness of the country, and should maintain contracts signed with foreign investors in the past years.
The top priority is the creation of a single law on investment which would equalise the rights of domestic and foreign investors. Article 6 of the Law On Foreign Investment provides investors with guarantees against any changes in laws. We consider that equal rights should be provided to all economic entities, irrespective of the country of capital origin. There should be one criterion, namely real investment which promotes economic growth in Kazakhstan.
Special emphasis should be placed on the activity of investors in the priority sectors of the economy. In our opinion, tax privileges and preferences should be kept. Without comprehensive state support, the volume of domestic and foreign investment in the priority sectors of the economy would be insufficient.
Nowadays, disputes are stirring up around the beneficial taxation of investors. The Ministry of National Revenue of the Republic of Kazakhstan believes that granted benefits are not in line with the principle of universality of tax laws. Here we are not referring, however, to individual investors, but to the whole category of investors carrying out their activities in the major branches of the economy.
Projects implemented in priority sectors create new market potential for the country’s economic growth, and promote the development of import substitution and export-oriented production. Signed contracts imply not only additional jobs and real Kazakhstani goods in the market, but also increased taxes and payments to the exchequer. Many of us plan to launch new projects. As a strong incentive, state support provided in the form of privileges and preferences reduces risks during the implementation of investment projects, and ensures their stability in many respects.
The problem of banking support for domestic investors is also critical. Kazakhstani businessmen are entering a stage of larger capital-intensive investment projects. It is evident that the existing crediting mechanism will hardly allow any considerable growth in financing the industrial sector, since our banks mainly provide short-term credits. However, growth in the industrial sector of the economy requires long-term investment, which is explained by the acute need for modernisation and the re-equipment of fixed assets.
In conclusion, I would like to emphasise that the Association’s scope of activities is constantly expanding. Although some of the plans have been fulfilled, I believe that our most interesting and important projects are still ahead of us. Examples of the intensive activities of business alliances show that our might is in unity, and the way to success lies in our solidarity. Together we can solve the most complicated problems in the further development of domestic business.
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