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

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC Ministry of Industry and New Technologies of the Republic of Kazakhstan

Investing in Kazakhstan The Second Phase of Industrialization

KAZAKHSTAN

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of 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

FDI FLOWS INTO KAZAKHSTAN

Gross FDI inflows - $ 183.9 bln., from which 55% were attracted between the period 2010 – 2013 ($ 101.8 bln.) Gross FDI inflows and outflows for the period 2005 – 2013, bln. $ Gross FDI inflows by countries for the period 2010 – 2013, bln. $

7.9 12.1 19.4 21.3 21.4 22.2 26.5 28.9 24.1 0.3 1.3 3.2 5.0 5.4 10.5 8.0 3.0 8.7 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 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 2.5 4.3 3.0 4.5 5.3 8.0 9.2 7.3 31.5 Italy Russia British Virgin Islands UK France China Switzerland USA Netherlands 36.6 36.0% 26.0 25.5% 14.1 13.9% 25.0 24.6% Professional, scientific and technical activities Mining and quarrying Manufacturing Other activities

FDI FLOWS INTO KAZAKHSTAN

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

Structure of FDI by types of economic activities in bln. $ and % 2012, bln. $ 2013, bln. $ FDI in manufacturing for 2010 – 2013 in mln. $

Source: National Bank of the RK 0.0% 17.2% 15.6% 29.9% 8.7 7.3 3.4 9.6

25.1% 11.8% 33.1% 30.0%

7.3 7.3 2.8 6.7

30.4% 30.1% 11.7% 27.8%

11820 83.6% 950 6.7% 642 4.5% 718 5.1% 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

MANY FOREIGN COMPANIES HAVE ALREADY INVESTED IN KAZAKHSTAN

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“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?

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

4

Bridge to the market of 3 billion potential customers

▪

3 of the 5 BRICS countries are in 4 hours flight

▪

Customs Union with Russia and Belarus with a population of 170 million and a total GDP of 2 trillion. USD

▪

Open economy (trade 70% of GDP)

▪

Entry into the WTO is expected in the first half of 2014

Political stability and good investment climate

1

▪

A high level of trust in political institutions and strength of investor protection (WEF 2013) in comparison with the countries of the CIS.

▪

Ease of Doing Business (50 on the list

• f World Bank Doing Business 2013:

22 place in the investor protection and 18 place in the payment of taxes).

Stable macroeconomic indicators and high growth

3

▪

GDP growth: 5.0% (IMF, forecast 2013)

▪

Low debt / GDP ratio: 13.2% (IMF, forecast 2013)

▪

Budget deficit: -2.5% (IMF 2012)

▪

Inflation rate: 6.0% (IMF, forecast 2013)

▪

Recovery of the rating to positive from stable according to the rating agency

2

Regionally attractive fiscal and non-fiscal regime and protection

• f foreign investment

▪

Attractive corporate tax rate (20%) and low VAT (12%)

▪

Fiscal and non-fiscal incentives for investors, including in SEZs

DOING BUSINESS IN KAZAKHSTAN IS MUCH EASIER THAN IN MOST EMERGING MARKETS

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

Doing Business 2014 Country rank

Source: World Bank Doing Business 2014 146 143 134 116 112 96 92 68 65 63 50 21 4 1 Uzbekistan Tajikistan India Brazil Ukraine China Russian Federation Kyrgyz Republic Italy Belarus Kazakhstan Germany United States Singapore

HIGH CONFIDENCE IN POLITICAL INSTITUTIONS AND STRENGTH OF INVESTOR PROTECTION

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

35 36 37 40 41 43 50 75 84 98 100 114 115 117 128 136 146

10 10 13 19 25 41 41 41 57 57 69 69 84 84 100 100 134

The index of public trust in politicians

Place in the ranking

Strength of investor protection

Place in the ranking Source: The Global Competitiveness Report 2013-2014 1.5 1.9 2 2.2 2.2 2.2 2.4 2.4 2.7 2.9 3.3 3.4 3.5 3.6 3.6 3.8 3.8 Czech Republic Brazil Kyrgyz Republic Ukraine India Croatia Poland South Africa Russian Federation Georgia United States Azerbaijan Jordan France Turkey Australia Kazakhstan 3.0 4.7 4.7 5.0 5.0 5.3 5.3 5.7 5.7 6.0 6.0 6.0 6.7 7.0 7.7 8.0 8.0 Switzerland Russian Federation Ukraine Czech Republic Germany Brazil France Australia Turkey India Italy Poland Azerbaijan Georgia Kyrgyz Republic United Kingdom Kazakhstan

INVESTMENT INCENTIVES

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“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

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, components, raw materials and spare parts imported for a project In-kind state grants CRITERIA for investment projects: Corresponds to the List of priority activities Tax allowances as per Tax code of the RK (deductions of the value of the preference

• bjects, and (or) further costs

to modernization up to 3 years) Preferences for strategic investment projects * Land , property tax 0% for up to 7 years Industrial subsidies for areas with low socio- economic development Corresponds to the List of priority activities The volume of investment exceeds 50 million USD OR Corresponds to the List of high- technology products

SECTOR-SPECIFIC INCENTIVES IN 10 DEDICATED SEZS ACROSS COUNTRY

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“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

“National Industrial Petrochemical Technopark” SEZ

(Oil and gas industry, petrochemicals)

“Burabai” SEZ

(Tourism)

“Astana new city” SEZ

(mixed)

“Pavlodar” SEZ

(petrochemical industry)

“Saryarka” SEZ

(metallurgy)

“Khorgos Eastern Gate” SEZ

(logistics)

“Park of innovative technologies” SEZ

(IT-industry, innovations)

“Chemical park Taraz” SEZ

(chemical industry)

“Ontystik” SEZ

(textile industry)

“Sea Port Aktau” SEZ

(mixed) Aktau Atyrau Astana Pavlodar Karaganda Shymkent Taraz Almaty

ATTRACTIVE INVESTMENT INCENTIVES IN SEZS

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

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

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

Vision and strategies:

• National vision – 2050
• National strategic development
• Plan
• Concepts reflecting some aspects
• f the vision

Strategic development directions (examples):

• Industrial innovation development
• Infrastructure
• «Green economy»
• Foreign policy
• Security
• Social development
• Authorities’ strategic plans:

Authorities’ strategic plans:

• Strategic plans
• Action plans
• Operational plans

Long-term vision Strategy “Kazakhstan’s way – 2050: common aim, common interests, common future”

1

Strategic Development Plan of the Republic of Kazakhstan - 2020

2 SPFIID 2015-2019

Infrastructure Agriculture Services and tourism Education and science

3

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

Key results and lessons from SPFIID 2010 – 2014

The process of diversification of the economy was successfully launched through accelerated development of the manufacturing industry, the increase of non-commodity exports and FDI inflow in non-natural resource sectors Employment in manufacturing hasn’t decreased despite the negative influence of global financial crisis Various tools and new policies to support industrial development were successfully piloted An effective system of institutes for industrial development was created Major projects, which are significant for the development of national economy, were supported A more narrow focus and concentration on the limited set of industrial sectors are needed to achieve sustainable results There is a need to organize adequate financial support for the Program It is necessary to simplify and improve the efficiency of Program architecture

SPFIID 2010 – 2014 has enabled to start the industrial diversification and overcome the consequences of the global crisis in Kazakhstan

Key lessons from SPFIID 2010-2014 Positive strategic changes in the economy and the system of governance Due to the implementation of the SPFIID 2010-2014 Kazakhstan has already made a significant progress in the industrial development Within the next five-year program of industrial development main focus will be made on improving efficiency

1 1 2 3 4 5 2 3

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

Goals, tasks and expected results of SPFIID 2015 – 2019 The Second Five-Year Plan is aimed at forced industrial development considering new opportunities created by SPFIID 2010-2014 and lessons learned Promote diversification and increase industry competitiveness

Program Goal

1. Increase added value and effectiveness in natural resources processing industries; 2. Accelerate manufacturing development; 3. Improve business climate for industrial development; 4. Establish the basis for the “sectors of the future” development through innovation clusters creation and the development of innovation infrastructure; 5. Support entrepreneurship and SMEs development.

Program Objectives

Conditions:

Investment agreement with TNCs

Non-financial incentives: Financial incentives:  Investments > $20 bln.  Personnel development The cancellation of visas for citizens of OECD countries Cancellation of registration Attracting foreign labor under a simplified procedure for the required period

The favorable conditions for investors’ arrival on a “persona grata” principle Stability of legislation for 10 years – guarantees of non changing

tax sphere migration sphere tariff sphere

New incentives

Preferential treatment Infrastructure

Special Economic Zones “NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

Improving of the investment climate. The ongoing work.

environmental sphere

Effect

Reimbursement of expenses after commissioning (30%) Guaranteed

• rder

Implementation of “One-stop shop” principle for investors Exemption from CIT for 10 years

• Advancement in the world rankings of

competitiveness

• Improving the country's position on key

parameters of doing business

• Stable economical growth of Kazakhstan
• Stimulation
• f

further economical development

• Further stimulation of FDI inflows in country’s

economy – creation of comfortable and conducive environment for it

• Increasing the investment attractiveness of

country

www.invest.gov.kz

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

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