Kazinvest: Outcomes and Prospects of Support for Investment
Askar Batalov, President of the Kazakhstan Investment Promotion Center KAZINVEST, answers questions of our magazine
What kind of assistance can potential investors expect from the Kazakhstan Investment Promotion Center?
Since 1997, our company has been providing a range of advisory services for domestic and foreign investors. Principally, these include assistance in setting up business in Kazakhstan, feasibility studies, and the signing of agreements with relevant public authorities. We can guide the investor through various complicated procedures while getting started in the country’s regions, as Kazinvest has representation in governments of all the oblasts in Kazakhstan. Normally, our initial task is to draw up a set of the necessary documents with due regard for local requirements. Next, our marketing teams assist the investor in studying the practicalities of project implementation in a particular region.
As an illustration of our efficiency, over the recent three years Kazinvest has helped investors sign 40 contracts with public bodies, and another 14 project agreements are in the pipeline.
In 2001 Kazinvest was licensed as a provider of legal services, which enhances our capacity for serving clients tremendously.
What distinguishes Kazinvest from other consulting companies?
Apart from consultancy, we have been heavily involved in the facilitation of international investors forums and conferences. I think I should elaborate on just a few events which have taken place due to Kazinvest’s efforts.
In April 2000, for the first time in Central Asia, Almaty hosted the Eurasia 2000 international economic summit, which was attended by over 500 prominent politicians and businessmen from 42 countries. In June the same year, the 1st Congress of Investors of Kazakhstan was held, which culminated in the creation of the national Investors’ Association. Later, investment conferences were held in Israel, Spain, and the UK, and in 2001 in Egypt and Germany. A major summit devoted to the prospects of the Kazakhstan oil sector took place in London in July 2001.
During these international gatherings, Kazinvest arranged a number of meetings between local businessmen and senior officials from Kazakh ministries. If an investor demonstrates any practical interest in our country, we help him to familiarise himself with the situation in various sectors of Kazakhstan’s economy, current legislation, preferential policies, investment opportunities, and other relevant matters. These contacts not only assist the development of economic relationships between the nations, but consolidate Kazakhstan’s image as a country that welcomes foreign investment.
Providing information to domestic and foreign investors operating in Kazakhstan is another important aspect of our activity. Kazinvest’s web site contains an extensive investment project database. We are also publishing various reference materials. Recently, a promotional video about investment opportunities in the Kazakh economy was made specially for foreign investors.
We regard encouraging domestic investment as an important role of ours, and put a lot of effort into running regular business seminars in various regions of Kazakhstan.
By providing businessmen with access to practical information we assist in their choice of target, searching for partners and initiating joint projects.
Can you point to any obstacles which have a bearing on the flow of international capital into the Kazakh economy?
Over 70% of the total annual foreign investments accrue to the mining sector, chiefly oil and gas, whereas investments in processing industries and agriculture account for less than 10%. Therefore it should be noted that this pattern of international capital involvement in Kazakhstan’s economy further aggravates the disproportion between its sectors and regions, with a trend towards the domination of the raw material sector. I believe that ensuring a more balanced development of the economy and its immunity from external impacts requires more foreign and domestic capital to be attracted by the priority sectors. Unfortunately, this disproportion between the regions is more difficult to influence, since investors prefer areas where developed transport and communications networks and a sound industrial potential are already in place.
Equally, Kazakhstan plays an important role as a transit area for international companies delivering goods from South China to Western Europe. As is expected, the country’s total revenue from railway transit alone will be as high as $1 billion by 2004. Therefore, we are aiming to encourage investment in the transport infrastructure, primarily the building of roads, campsites, and car service stations, etc.
At present, national priorities include the processing industries, the production infrastructure and, particularly, the development of the city of Astana. What contribution is your company making to these?
The last three years have seen the signing of 226 contracts on investments in the priority sectors of Kazakhstan’s economy. These include the 40 contracts prepared by our company, which are all being implemented. They range from building materials manufacture, house building in Almaty and Atyrau and the development of the Ramstor network of shopping centres to projects in the food industry, including the bottling of mineral water, and the production of vegetable oil, etc.
Last summer, a campaign for the legalisation of the «shadow capital» was run in Kazakhstan. Do you think it had any impact on the investment activity in the priority sectors of the economy?
Indeed, during the last year there has been a palpable increase in the activity of domestic investors, which include mostly large banks and pension and investment funds. Currently, all of them are in search of efficient investment opportunities. Unfortunately, the national financial market is not yet in a position to adequately respond to this demand, whereas the real sector of the economy demands long-term investments with a degree of risk. Furthermore, the profitability levels of these projects are not satisfactory to potential investors. As a result, despite governmental policies including relief in respect of income tax, land tax and property tax, capital flow into these sectors decreased in 2000.
However, since 1 September 2001, after the capital legalisation campaign, 23 investment proposals have been put forward regarding projects in the priority sectors, as compared to 13 proposals in the previous year.
What changes in Kazakhstan’s investment regulations will investors face in 2002?
To any investor, the key selection criteria are profitability, reliability and liquidity. Therefore, the legal framework of an investment arrangement should provide for the maximum protection against whatever risks. The decision on investment is normally based on the state of investment laws, access to necessary information, guarantees for the investor, and tax preferences.
Over the coming year, the Kazakh government will continue amending the existing investment laws. From 1 January 2002, a new Act, On Investments, will come into effect, which was drafted on a presidential initiative. The principal goals of the new act are to broaden the policy of attracting investments, to ensure the equal treatment of foreign and domestic investors, and to strengthen government support for investors, with a focus on a simplification and a transparency of the procedure leading to an investment project agreement. Special attention is being devoted to guarantees for investors and providing them with equal conditions. Thus, the scope and conditions of investment preferences have been set, and provisions are being made for guarantees against changes in laws, as stipulated in Article 6 of the Act On Foreign Investments of 27 December 1994. Finally, provisions for tax preferences are being brought into accord with the new Tax Code, which also will be effective from 1 January 2002.
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