We are Always Open to Dialogue
Yerlan Hairov, Chairman of the Committee for Investment of the Ministry of Industry and New Technologies of Kazakhstan, answers questions from the Kazakhstan magazine
Mr. Hairov, how did the situation with the attracting of FDI into the economy of Kazakhstan changed in 2013?
As you know, in his Address "Kazakhstan-2050 Strategy: a New Line of Policy of the Accomplished Country", the President paid special attention to attracting investment. The line of policy announced in this Address has made it possible to ensure stable growth of investment and increase the investment attractiveness of the country, in general.
Since 2005, $184 billion of gross foreign direct investment has been attracted into the country's economy. With this, 55% of this has been raised since 2010, i.e. during the period of implementation of the state-run PAIID. In the last nine years, $20.2 billion has been invested in the manufacturing industry of Kazakhstan. Of this, $14.1 billion, or 70%, was raised in the first five years of the accelerated industrialization program.
To date, we have identified six priority countries according to their industry specialization. These are Germany (mechanical engineering, mining & metallurgy, and chemistry), France (mechanical engineering, nuclear power, aerospace, and pharmaceuticals), the United States (innovation, pharmaceuticals, and petrochemicals), Japan (electronics and robotics, transport engineering (automotive industry, shipbuilding, and machine tools), South Korea (mining and metallurgy, IT, mechanical engineering, electrical engineering, chemistry), and the UK (innovation, chemistry, and mining & metallurgy).
A list was made of priority projects, involving 44 projects to the total amount of $17.6 billion, and a list of 136 high-tech leaders among multinational corporations. In addition, the work covers more than 300 investment projects. Of these, 110 projects to the total amount of $21 billion are already accomplished; 98 projects to the total amount of $45 billion are currently under implementation, and 131 projects, worth a total $34 billion, are planned for the future.
According to the World Bank's ranking “Doing Business 2013”, Kazakhstan rose to the 50th of 185 countries in 2013 (53rd in 2012) that made the country stand far ahead of most of the CIS countries.
Today, Investor Service Centers operate in regions of the country, providing support and help to the investors in the regions.
To improve the conditions of entry and stay of foreign investors in the country, the term for the issuing of visas to investors was cut from 5 to 3 days.
Establishing a direct dialogue between investors and public agencies plays an important role in attracting investment and creating favorable conditions for the investors. To resolve strategic issues, the Foreign Investors’ Council under the chairmanship of the President was set up and is actively operating, while the other body, the Council to Improve the Investment Climate chaired by the Prime Minister, deals with systemic issues. The work to address investors' issues is built on the principle of an "investment ombudsman".
Efforts to improve the investment image of the country play a considerable role in attracting investment. These efforts are aimed at establishing direct contact with the investor, and these efforts are implemented with the participation of national holding companies and development institutions in the framework of business forums, road shows and other investment activities.
In 2013 the Committee on Investments held 14 business forums; of these, 5 were held abroad and the other 9 in Kazakhstan. As a result, about 40 bilateral documents on cooperation, worth some $2 billion total, were signed. Moreover, four roadshows were organized in Japan, the U.S., Brazil, and Germany. Another 8 roadshows were held with the aim of attracting on the spot the attention of major European companies for joint investment projects under the state-run PAIID.
As for the current year, an exhibition and presentation of Kazakh-Dutch investment projects was held on March 23 in The Hague. Within its framework, 25 promising projects worth over 330 million euros with participation of foreign companies, such as Royal TenCate, Royal Philips, Damen, Shell Development, Key Gene, Flowserve, etc. were presented.
Also, on March 27–30 Almaty hosted "The India Show" business forum, held in the format of an industrial conference, which was attended by India’s Ministry of Commerce and Industry and the Confederation of Indian Industry.
What issues, in your opinion, are still unresolved from the viewpoint of increasing the investment attractiveness of Kazakhstan? Are there any further plans to modify the legislation in order to improve the investment climate in non-raw material sectors of the economy?
During the implementation of the first five-year period of the state-run PAIID, the main direction for diversification of the economy was set and, in particular, emphasis on attracting foreign investment in the non-raw material sector was put.
According to the Concept of Industrial and Innovative Development of Kazakhstan for 2015–2019, the industrial policy will focus on the priority sectors, which will help reduce the economy's dependence on extractive industries. These sectors were selected, taking into account their investment attractiveness in the medium term.
Improving the investment climate is a routine work that requires close attention. Following this fact, we focus our activities on identification and elimination of "bottlenecks" in the investment-related laws, since the creation of an adequate and favorable legal environment is the fundamental guarantee for investors.
Since 2012, the government has expanded measures of state support for strategic investment projects; the legislation on development of special economic zones, particularly those created on private lands, has improved.
In a review of the country's policy in this regard, the OECD experts presented 12 recommendations on how to improve the investment climate, taking into account international best practices. The government is now gradually implementing these recommendations.
Today’s achievements for us are not at the point to stop and not move ahead. The task is set before Kazakhstan to be in the list of top 30 most developed countries in the world. In his address, the President set a task to introduce new incentives for investors, especially multinational companies. All of this requires us to act at an entirely different level.
We have plans to adopt a series of measures to simplify the conditions of entry and stay of foreign investors in Kazakhstan. We realize that the simpler the visa regime is, the more accessible our country is to investors. The first steps in this direction could be the abolition of visas for investors from the list of priority countries, the automation of registration, as well as attracting foreign experts for a certain period in a simplified manner. It should be noted that the main focus will be made to attract investment in the manufacturing sector.
One of the pressing issues is the post-investment support of foreign investors operating in the country, especially the addressing of issues they face in their work in Kazakhstan. According to international statistics, the greater part of investments are made by the operating investors, thus, rapid response to emerging issues and their resolution will contribute to the growth of production and reinvestment.
In this regard, we are conducting activities to launch the Institute of Investment Ombudsman in Kazakhstan, as I previously mentioned, which will allow ensuring a systematic approach to solving current problems of investors, as well as to take preventive measures to resolve points at issue and avoid their being brought to courts. This is another platform for dialogue with investors, designed to protect their rights and interests.
To date, thanks to the survey of foreign business associations that operate in Kazakhstan and represent the interests of foreign companies, the Investors Support Center at JSC KAZNEX INVEST has revealed a number of issues that impede the implementation of investment projects. To assist in their elimination, we engage in relevant continuous work.
I want to emphasize that we are always open to address issues the investors face, and to jointly seek for their solutions.
At its next meeting, the FIC will discuss issues of foreign investors' participation in implementation of the second five-year plan in Kazakhstan. What can be their contribution in implementation of this initiative?
As you know, the Foreign Investors’ Council was established in 1998 to promote direct dialogue between the Government of Kazakhstan and investors to effectively address issues related to their activities in the country, and improve the investment climate.
The Council develops recommendations and proposals on key aspects of the investment policy and economic development of the country, including the improvement of the regulatory framework, industrialization, strengthening of small and medium businesses, as well as other issues of international concern.
Permanent members of the Council from the Kazakh side are senior government officials, including the Prime Minister and his deputies, the Chairman of the National Bank, as well as the ministers of foreign affairs, industry and new technologies, etc.
From the foreign side the Council is represented by the heads of international financial organizations and foreign companies. Currently, it is composed of representatives of 27 large multinational corporations, including the European Bank for Reconstruction and Development, Chevron, Deutsche Bank Frankfurt, Metro Cash & Carry International, Mitsubishi, TeliaSonera, Total, Asian Development Bank, etc. But the total number of the companies, engaged in sectors of the economy, such as oil and gas, mining & metallurgy, mechanical engineering, construction, the financial sector, etc., of which representatives comprise the Council is 35.
Since the time of establishing the Foreign Investors’ Council, 26 plenary meetings chaired by the President of the Republic of Kazakhstan have been held. At them, the meeting participants discussed primarily issues such as the improvement of the legal environment for investment, perfection of the judicial system, optimization of taxation, human capital development, control of importation of foreign labor, and strengthening of the investment image, etc.
In addition, representatives of the Council members from the foreign side and members of the Government of Kazakhstan regularly exchange their views at meetings of the three working groups of the FIC, which are duly held as scheduled during the year.
The 27th plenary meeting of the Council will be held on June 12–13 this year in the Hotel Rixos Borovoe. At this event, the FIC members will deliver their speeches as to their further plans for implementation of investment projects in the framework of the second five-year plan for industrial and innovative development.
Given the agenda of the upcoming meeting, we hope that the members of the FIC from the foreign side will share their experience gained from implementation of similar programs in other countries that will significantly add to achieving the objectives of the forthcoming five-year period of accelerated industrial and innovative development.