Investing in Kazakhstan The Second Phase of Industrialization - PowerPoint PPT Presentation

Investing in Kazakhstan The Second Phase of Industrialization “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC Ministry of Industry and New Technologies of the Republic of Kazakhstan

KAZAKHSTAN  Territory: 2.7 mln. sq. km.  Population (01.02.2014): 17.2 mln.  GDP, 2013: $ 220.3 bln.  GDP per capita , 2012 : $ 12 933  Major languages • Kazakh (state language); • Russian (official, business language); • English, Chinese (young generation).  Main ethnic groups: • Kazakhs: 65% • Russian: 25% • Other: 10% Source: The Agency of Statistics of the Republic of Kazakhstan “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

FDI FLOWS INTO KAZAKHSTAN Gross FDI inflows and outflows for the period 2005 – 2013, bln. $ 35.0 28.9 30.0 26.5 24.1 22.2 25.0 21.3 21.4 19.4 20.0 12.1 15.0 10.5 8.7 7.9 8.0 10.0 5.4 5.0 3.2 3.0 5.0 1.3 0.3 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Gross inflow of FDI in Kazakhstan from foreign direct investors Gross outflow of FDI abroad from Kazakhstani direct investors Gross FDI inflows by countries for Gross FDI inflows - $ 183.9 bln., the period 2010 – 2013, bln. $ from which 55% were attracted between the period 2010 – 2013 ($ 101.8 bln.) Netherlands 31.5 USA 7.3 Professional, 25.0 36.6 scientific and Switzerland 9.2 24.6% 36.0% technical activities China 8.0 Mining and quarrying France 5.3 Manufacturing UK 4.5 British Virgin Islands 3.0 14.1 Other activities Russia 4.3 26.0 13.9% 25.5% Italy 2.5

FDI FLOWS INTO KAZAKHSTAN FDI in manufacturing for 2010 – 2013 in mln. $ 642 718 950 4.5% 5.1% 6.7% Manufacture of basic metals and fabricated metal products Manufacture of food products, beverages and tobacco products Manufacture of computer, electronic and optical products Other sectors 11820 83.6% Structure of FDI by types of economic activities in bln. $ and % 2012, bln. $ 2013, bln. $ 8.7 6.7 7.3 0.0% 9.6 27.8% 30.4% 33.1% 30.0% 17.2% 15.6% 11.7% 11.8% 30.1% 25.1% 3.4 2.8 29.9% 7.3 7.3 Source: National Bank of the RK “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

MANY FOREIGN COMPANIES HAVE ALREADY INVESTED IN KAZAKHSTAN • SLIDE TEXT “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

WHY IS KAZAKHSTAN ATTRACTIVE FOR FOREIGN INVESTORS? Regionally attractive fiscal and 1 Political stability and good 2 non-fiscal regime and protection investment climate of foreign investment ▪ A high level of trust in political institutions and strength of investor ▪ Attractive corporate tax rate (20%) and protection (WEF 2013) in comparison low VAT (12%) with the countries of the CIS. ▪ Fiscal and non-fiscal incentives for ▪ Ease of Doing Business (50 on the list investors, including in SEZs of World Bank Doing Business 2013: 22 place in the investor protection and 18 place in the payment of taxes). 4 Bridge to the market of 3 Stable macroeconomic 3 indicators and high growth billion potential customers ▪ 3 of the 5 BRICS countries are in 4 ▪ hours flight GDP growth: 5.0% (IMF, forecast 2013) ▪ ▪ Customs Union with Russia and Low debt / GDP ratio: 13.2% (IMF, Belarus with a population of 170 forecast 2013) million and a total GDP of 2 trillion. ▪ Budget deficit: -2.5% (IMF 2012) USD ▪ ▪ Inflation rate: 6.0% (IMF, forecast 2013) Open economy (trade 70% of GDP) ▪ ▪ Recovery of the rating to positive from Entry into the WTO is expected in the stable according to the rating agency first half of 2014 “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

DOING BUSINESS IN KAZAKHSTAN IS MUCH EASIER THAN IN MOST EMERGING MARKETS Doing Business 2014 Country rank Singapore 1 United States 4 Germany 21 Kazakhstan 50 Belarus 63 Italy 65 Kyrgyz Republic 68 Russian Federation 92 China 96 Ukraine 112 Brazil 116 India 134 Tajikistan 143 Uzbekistan 146 Source: World Bank Doing Business 2014 “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

HIGH CONFIDENCE IN POLITICAL INSTITUTIONS AND STRENGTH OF INVESTOR PROTECTION Place in the Place in the The index of public trust in politicians Strength of investor protection ranking ranking Kazakhstan 3.8 35 Kazakhstan 8.0 10 Australia 3.8 36 United Kingdom 8.0 10 Turkey 3.6 37 Kyrgyz Republic 7.7 13 France 3.6 40 Georgia 7.0 19 Jordan Azerbaijan 3.5 41 6.7 25 Azerbaijan 43 Poland 3.4 6.0 41 United States 50 Italy 3.3 6.0 41 Georgia 75 India 2.9 6.0 41 Russian Federation 84 Turkey 2.7 5.7 57 South Africa 98 Australia 5.7 2.4 57 Poland 2.4 100 France 5.3 69 Croatia 2.2 114 Brazil 5.3 69 115 India 2.2 Germany 5.0 84 117 Ukraine 2.2 Czech Republic 5.0 84 128 Kyrgyz Republic 2 Ukraine 4.7 100 136 Russian Federation Brazil 1.9 4.7 100 146 Switzerland Czech Republic 1.5 3.0 134 Source: The Global Competitiveness Report 2013-2014 “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

INVESTMENT INCENTIVES LAW OF THE RK DATED AS 08.01.2003 № 373-II «ON INVESTMENTS» Preferences for investment projects in priority sectors Exemption from customs duties on equipment, In-kind Tax allowances as per Tax components, raw materials and spare parts imported state code of the RK (deductions of for a project grants the value of the preference objects, and (or) further costs to modernization up to 3 years) CRITERIA for investment projects:  Corresponds to the List of priority activities Preferences for strategic investment projects * • SLIDE TEXT Industrial subsidies for areas with low socio- Land , property tax 0% for up to 7 years economic development Corresponds to the List of priority activities Corresponds to the List of high- The volume of investment exceeds OR technology products 50 million USD “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

SECTOR-SPECIFIC INCENTIVES IN 10 DEDICATED SEZS ACROSS COUNTRY “ Burabai ” SEZ “ Astana new city ” SEZ (Tourism) “National Industrial Petrochemical (mixed) Technopark ” SEZ (Oil and gas industry, petrochemicals) “ Pavlodar ” SEZ • SLIDE TEXT (petrochemical industry) Astana Pavlodar Karaganda Atyrau “ Saryarka ” SEZ (metallurgy) “ Khorgos Eastern Aktau Taraz Almaty Gate” SEZ Shymkent (logistics) “Park of innovative “Sea Port Aktau ” technologies” SEZ “Chemical park Taraz ” “ Ontystik ” SEZ SEZ SEZ (IT-industry, innovations) (textile industry) (mixed) (chemical industry) “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

ATTRACTIVE INVESTMENT INCENTIVES IN SEZS FISCAL INCENTIVES in SEZs • 0%Corporate Income Tax until 2020-2025 with possibility for extension • 0% for land and property tax until 2020-2025 with possibility for extension • VAT – 0% (for products consumed in SEZ) until 2020-2025 with possibility for extension • Increase of marginal rate of depreciation for tax on the production of software to 40% • For “Park of innovative technologies” SEZ – social tax is 0% for 5 years, under certain conditions • For “Park of innovative technologies” SEZ – depreciation rate for software increased to 40 % NON-FISCAL INCENTIVES • Provision of free land in SEZ for a period of up to 10 years from registration time as SEZ tenant • Simplified procedure for the recruitment of foreign labor “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

Industrialization concept 2015 – 2019 State Program of Forced Industrial and Innovative Development (SPFIID) 2015-2019 is the interdepartmental program focused on industrial development Comments Hierarchy of Strategic Documents 1 Vision and strategies: Long-term vision  National vision – 2050 Strategy “Kazakhstan’s way – 2050: common  National strategic development aim, common interests, common future”  Plan  Concepts reflecting some aspects 2 of the vision Strategic Development Plan of the Republic of Strategic development directions Kazakhstan - 2020 (examples):  Industrial innovation development 3  Infrastructure  «Green economy» Education and SPFIID 2015-2019 Infrastructure Services and  Foreign policy Agriculture science tourism  Security  Social development  Authorities’ strategic plans: Authorities’ strategic plans:  Strategic plans  Action plans  Operational plans “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan