Invest in Astana!
Astana’s Mayor Adilbek Dzhaksybekov answers questions put by our magazine
What arrangements are being made to increase the flow of investment into the construction of Astana?
As you may be aware, the main task of the Astana authorities is construction of a new administrative centre on the left bank of the Yesil River and systematic reconstruction of the city areas on the right bank. To draw investment into the construction of the new city, President Nursultan Nazarbaev of Kazakhstan signed a Decree, effective from 1st January 2002, establishing an Astana New City Special Economic Zone (SEZ).
This decision furthers the investment in the efficient development of high-priority left-bank construction projects. Among these projects are construction of administrative and housing complexes and the development of the city’s infrastructure.
In the SEZ territory, the companies involved in construction on the left bank will be provided with a number of tax exemptions and privileges. For instance, they will be exempt from VAT when selling the first batch of facilities in the SEZ. Turnover for supplies and equipment used during the construction and commissioning of infrastructure, administrative and housing facilities in SEZ will be subject to a zero VAT rate. The land lots on which these facilities are built will be exempt from land tax. Legal entities and individuals will be exempt from property taxes on buildings and installations in the SEZ. The SEZ enjoys a free customs zone regime with all the ensuing customs privileges. The SEZ will be effective till 2007.
According to the Astana General Development Plan, $1.6 bn will be invested in developing facilities and engineering networks on the left bank during the next five years. There are also a number of projects in need of substantial investment.
In this sense, investment summits have become an effective instrument for attracting foreign investment. The first event of this kind was the ‘Astana-Invest International’ Conference held in London in 1999. The second took place in Astana in 2000. This year, investment opportunities in Astana will be presented at the ‘Astana-City of the Future’ conference at the Okan-Intercontinental-Astana hotel, scheduled for 10-11th October. The Astana-Invest 2003 conference will be held in Berlin next year.
Could you tell us more about the investment projects realized last year?
In Astana, building and assembly operations are being carried out intensively. The activities of the Azon company, which started producing heat-insulated “sandwich panels” with improved decorative coatings for easy installation of low-rise buildings, deserves a special mention. This company also produces polyurethane foam insulated water-proof pipes used in heating mains and other lines. The Astana-Keramzit joint stock company resumed production of claydite gravel.
The Akmola Railway Carriage Repair Works, together with Polish companies, mastered the installation of elastomer cushions that ensure safe movement of rolling stock. Tselingidromash began manufacturing bituminous pumps and R F current hardening plants. The Poisk company began manufacturing lifting jacks.
Projects in the food industry are developing rapidly. The Tsesna-Astyk concern brought a provender mill and a new bread production line into operation.
Such industrial expansion has had a good social effect, creating more than 900 new jobs. Other projects important for the community were completed: a bridge over the Yesil River for road vehicles, with a specially built quay area, a third aqueduct between the Vyacheslavsky reservoir and Astana, the Irtysh-Karaganda canal, an automatic telephone exchange for 4000 numbers, the State Clinical Hospital, the Master building materials market, the Everest Trade House, The Map of Kazakhstan ethnic memorial park, a monument to the Defenders of the Homeland and an aqua park.
On the left bank, the Astana-Baiterek monument and a new school for 1200 pupils were opened. The KazmunaiGaz company headquarters and the Ministry of Transport and Communications buildings are nearing completion.
How are investment projects financed?
A set of measures has been taken to make Astana one of the most investor-friendly cities in Kazakhstan. Since Astana was officially named the Capital of Kazakhstan, investments have grossed $2.5bn. In 2001, the Moody`s Investors Service International Rating Agency awarded Astana the Ba3 credit rating with a stable outlook, which encouraged additional investment.
At present, there are about 300 foreign companies and joint ventures operating in Astana and representing Russian, Turkish, German and Swiss businesses. They are engaged mostly in wholesale trade, construction, transport, communications and real estate operations.
Ahsel Holding built the Ahsel business centre and Ramstor Shopping Mall at its own expense. The five star Okan-Intercontinental-Astana Hotel built by Okan Holding is operating successfully. Ispat Karmet completed construction of the Aquapark amusement complex worth $2m. The British company Fitzpatrick Construction built a modern clinical hospital for 240 patients.
Renovation of the Astana International Airport, to be financed by Japan Bank for International Cooperation and from the state budget, has begun. Investment construction projects are mostly financed by the companies themselves.
The blueprint for the city development provides for achieving the level of investment in fixed capital of $700m in 2002 (of which $30m to be provided by foreign investors) and $792m in 2003 with foreign investment accounting for $34.1m of that amount.
What are the main trends in the industrial development of Astana?
At present, the city’s industrial potential is formed by 60 large enterprises and about 16,000 medium and small ones. Most of these work in manufacturing, which accounts for about 60% of total industrial production. There is a trend towards an increase in the number of foodstuffs producing companies. The indicator grew by one third compared with 1999. Mostly this is due to companies producing dairy products, beverages, wheat flour and bakery items. It is noteworthy that, although in 2000 production growth stood at only 5%, last year it surpassed 10%.
However, all these companies share one serious problem: the low competitive edge of their services and products. Metropolitan companies need to reshape their style of work to improve marketing activities, introduce high technology, rebuild their capital assets and broaden the range of goods manufactured.
Last year, companies such as Tselingidromash, Cesna-Astyk, Akmola Railway Carriage Repair Works, StroiConstruction, April Ltd. and others started to draw up the documentation required to introduce the ISO-9000 quality control system.
In my opinion, it is important that companies from Astana participate in international exhibitions promoting local goods on both domestic and external markets. It was good to hear that seven companies have been granted diplomas for high product quality.
Another priority in our investment policy is to search for new investment partners for local industry, and for renovation of the sector, also to update and introduct high-end technologies and international know-how into the services sector.
We plan to promote high-tech, environmentally friendly and easy to assemble production lines. The formation of a wide network of mobile and convertible medium and small companies is our next plan.
What efforts is Astana City Akimat making to promote small and medium-sized businesses?
Today, there are about 8,000 small enterprises employing 35,000 people, and over 11,000 individual businessmen working in Astana. About 1,500 projects have received more than 15bn tenge loans from all financial sources. In a breakdown of credit resources, industry (55%), trade (30%) and construction (6%) are the dominant sectors.
We have proposed and approved a programme of support and development for small enterprises in 2001-2002. This is aimed at improving development measures for small enterprises, creation of conditions conducive to their growth, and increasing employment.
A special service centre for small businesses is organizing new jobs and helping professionals to adapt to new market conditions.
On 18th September a businessmen’s forum was held in Astana with the participation of the President of Kazakhstan. The problems of business development were discussed. The President spoke about the creation of a State Investment Fund for implementing the most promising projects in the sphere of small and medium-size businesses. I am sure that this will have a noticeable effect on business development.
What is the state of tourism in Astana?
There are 30 tourism firms in Astana. They provide diverse programmes and trips such as exotic tours to the Kazakh steppes, falconry, and a tour to the Unique Korgalzhy steppe reserve where the wildlife features more than 350 plant species. Tourists are offered tours to the places remote from urban areas to acquaint themselves with folk cuisine, and the way of life and customs of Kazakh people.
A great deal of attention is being paid to the development of business tourism, organizing meetings of businessmen from different countries who wish to visit Kazakhstan seeking potential business partners. Annually, fifteen diversified international exhibitions inviting hundreds of foreign companies, national industry seminars, international symposia and business forums are held in Astana.
The growth of business activity is bringing an increase in the number of guests at hotels. Around 29,000 people stayed in the metropolitan hotels in 1998; by 2001 this number had grown to 92,000. There are over 35 hotels (3 to 5-star) meeting international standards in Astana.
The development of internal and external tourism is bringing in considerable municipal budget revenue and creating additional jobs.
All this causes us to believe that there will be a further increase in direct investment in Astana’s tourism and consumer services sector.
Invest in Astana! Adilbek Dzhaksybekov
Activities of Maersk Oil Kazakhstan GmbH Svend Andersen
Embamunaigaz: Still Up to the Mark Malik Omirzak
Oil Insurance Company: Cornerstone in Protecting Your Future! Zharkyn Alzhanov
Altynalmas: Marriage of Experience and Professionalism Nurlan Makulbekov
Helios Means First! Shukhrat Danbai
Brief Analysis of Draft Law ”On State Regulation of Production and Turnover of Certain Types of Petroleum Products” Olga Chentsova, Angelika Novozhilova
Kazakhstan and International Law Implications of the Proposed Law “On State Regulatory of Production and Turnover of Certain Types of Oil Products” Thomas C. O’Brien, Alyia M. Suleimenova
Outlook and Necessity for Developing Small Hydrocarbon Fields Elvira Dzhantureyeva
New Rules for the Purchase of Goods, Work and Services in the Performance of Petroleum Operations in Kazakhstan Olga Chentsova, Natalia Brainina
Certain Environmental Aspects of the Activities of Subsoil Users Aigul Kenjebayeva, Yuliya Mitrofanskaya
Issiue Deductibility of Interest on Foreign Currency Loans Bill J. Page, Gaukhar Iskakbayeva
Leasing in Kazakhstan: Legal Aspects of Development Tatyana Issyk