A new era is about to start in Kazakhstan. Faced with external economic pressures and reduced oil revenues, the country’s leadership has launched two major initiatives designed to stimulate the economy – Plan for a Nation and Bright Path. Invest in Kazakhstan 2016 drills under the surface of the reforms to find out what opportunities they present for investors.
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Invest in Kazakhstan 2016
1. An official publication of
the Government of the
Republic of Kazakhstan
KAZAKHSTAN
Invest in
2016
P8 How the 'One Belt, One Road'
initiative is boosting trade
P36President Nazarbayev on
the Kazakh opportunity
P78 The new financial center
with its own legal system
Working with
SWF Samruk-Kazyna
In association with Astana Economic Forum
and the Economic Initiatives Fund of Kazakhstan
2.
3. 3INVEST IN KAZAKHSTAN 2016
FOREWORDS AND
PERSPECTIVES
8Nursultan Nazarbayev
President of the Republic
of Kazakhstan
13Erlan Idrissov
Foreign Minister of the
Republic of Kazakhstan
15Kairat Umarov
Ambassador of the Republic of
Kazakhstan to the United States
16Umirzak Shukeyev
Chief Executive Officer,
Samruk-Kazyna JSC
CONTENTS
20
4. CONTENTS
INVEST IN KAZAKHSTAN 20164
THE DIVERSIFICATION
DRIVE
20A clear path
Kazakhstan is intensifying
efforts to diversify its economy
in order to join the world's top
30 developed economies by 2050
24A new era in trade relations
Accession to the WTO and
membership of the Eurasian
Economic Union underlines
Kazakhstan's commitment to
building a world-class economy
26High-octane opportunities
A new privatization plan and
a series of market reforms
are creating unprecedented
opportunities for
foreign investors
30Step change
Kazakhstan has launched a
stimulus plan comprised of
100 Concrete Steps to implement
five institutional reforms and
stimulate widespread growth
32INTERVIEW
Rakhim Oshakbayev
Former Vice Minister for
Investment and Development
30
EXTRACTIVE
SECTORS
51In the pipeline
Oil and gas is Kazakhstan's
leading economic sector
and further discoveries
will likely boost output
52The Caspian oil deal
A Russian-Kazakh deal has been
signed for the joint development
of the Tsentralnaya structure
55Anglo-Kazakh trade
steps up a gear
The UK and Kazakhstan bolster
ties following new agreements
in the oil and gas sector
56A fourth oil refinery
Another oil refinery is being
built to produce high-octane
gasoline and jet fuel
59IN FOCUS
Kanat Bozumbayev
Minister of Energy
63Major expansion at Tengiz
Tengizchevroil has launched
a $7.4 billion project to raise
output at the Tengiz field to
854,000 barrels per day by 2021
66Digging deeper
A new subsoil law, structural
reforms and low production
costs are liberalizing foreign
investment in metals
and minerals
THE NEW SILK ROAD
36Paving the way for trade
China's 'One Belt, One Road'
initiative is strengthening
Kazakhstan's position as a
major Central Asian trade hub
38The strategy takes shape
Infrastructure developments are
enhancing transport capacity
and logistical efficiency
42Rail renaissance in Eurasia
Demand is fueling railway
expansion and modernization
44INTERVIEW
Karl Gheysen
CEO of
Khorgos Gateway
Rail renaissance in Eurasia
Demand is fueling railway
expansion and modernization
56
5. CONTENTS
5INVEST IN KAZAKHSTAN 2016INVEST IN KAZAKHSTAN 2016
ENERGY
70Power surge
Energy market reforms are
expected to spur cross-border
trading among Eurasian
Economic Union states
and feed the green economy
72Nuclear power plans
To reduce the country's reliance
on fossil fuels, Kazakhstan plans
to build a least one nuclear
power plant by 2025
74A green future
Expo 2017 will promote
Kazakhstan as a regional leader
in renewable energy, advanced
technology and green business
OPPORTUNITIES
BY SECTOR
78The Astana International
Financial Center
A possible regional hub for
Islamic banking, private
banking and reinsurance,
the AIFC will have its own
legal system
81Islamic finance
receives a boost
Popular awareness of the
opportunities Islamic finance
presents will determine its
future success
82Harvest time
Kazakhstan is opening up
its agriculture sector to
encourage investment
87Ripe for organic production
Organic agriculture is
expanding in response
to growing demand at
home and abroad
74
82
78
72
9. 9
The Plan for the Nation works to strengthen public unity
and stability, to develop Kazakstan's economy in the
new global reality
he world is currently going
through a difficult stage of
development. Let's have
no illusions: there will
be no easy economic or
geopolitical solutions for anyone. However,
the situation could have been much more
dramatic for us, were it not for balanced
political decisions, new laws and strategic
programs adopted over the course of the
past three years. In particular, our strategic
goals and tactical aims – Strategy 2050,
Nurly Zhol, Plan for the Nation, and so on.
Since the beginning of the year,
Kazakhstan has been living in a new
legal and institutional environment.
This environment was formed by 59
newly passed laws and more than 400
government decrees. Yesterday's plans
became today's reality. New opportunities
now lay open to every citizen of
Kazakhstan, similar to those enjoyed in
the most developed countries of the world.
The national economy has a new
investment drive. Our country is now
ranked 41st out of 189 in [the IMF's]
Doing Business rating. Kazakhstan's labor
market efficiency is ranked 18th out of
140. We have opened a green corridor for
international investors. The agricultural
sector has already attracted investors from
NURSULTAN
NAZARBAYEV
President of the Republic of Kazakhstan
T
Germany, Italy and China, who plan to
participate in building two large-scale milk
farms and a factory in Akmola Region. There
are also plans to construct several modern
meat processing factories with a total
output of 37,000 tonnes per year in the
East Kazakhstan, Aktobe, West Kazakhstan
and Kostanay Regions. Investments in these
projects total 66 billion tenge.
A multimodal Eurasian transcontinental
corridor is emerging in Kazakhstan
as an integral part of global logistics.
Kazakhstan's zone in the Chinese port of
Lianyungang alone will increase the freight
transit through our territory sevenfold.
The European Commission has lifted
all restrictions on Air Astana flights to
European Union countries.
We are implementing a new state
healthcare program. A new law has laid
the foundations for a joint system of
implementation and commercialisation
of scientific projects. Five of our scientific
projects are already being commercialised.
Six of Kazakhstan's colleges have received
425 million tenge in modernisation
grants from the World Bank. This is an
important push in our drive to bring free
craftsmanship training to all.
A new educational and scientific
program has got underway. It has been
re-targeted towards lifelong education
and its vector has been changed to
reflect the labor market demands. This
approach will aid workforce mobility and
productivity. International certification
standards are being introduced in our
universities, extramural education gives
way to distance learning. 100% of children
will receive primary education.
In 2017 we will gradually start to
introduce three-language education.
By the year 2020 we will complete the
transfer to a 12-year school system.
Every school graduate will have a
chance to get their first craftsmanship
qualification free of charge. Scientists
believe that by 2020 half of the world's
population will be children of the digital
age. The new generation of schoolchildren
will live, study, and work in a digital
world. Therefore we have to persist in
introducing new technologies to schools,
otherwise we simply won't be able to
tackle modern educational challenges.
Already, 2,500 of our schools have an
internet connection, and a further
1,500 are in the pipeline.
The Plan for the Nation works to
strengthen public unity and stability, to
develop Kazakstan's economy in the new
global reality. It brings us closer to our
main aim for the century – to be one of the
30 world-leading countries – and gives our
society strength, dignity and assuredness.
Excerpts taken from President Nazarbayev's
speech at the opening session of the new
Parliament on 25 March 2016.
INVEST IN KAZAKHSTAN 2016
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12.
13. 13
FOREWORD
INVEST IN KAZAKHSTAN 2016
riends and partners of Kazakhstan,
it is with great pleasure that
I welcome you to Invest in
Kazakhstan 2016.
This year we celebrate 25
years of independence. It has been a remarkable
quarter century and its importance we are
yet to fully comprehend. Great progress has
been made and the country now makes a
significant contribution to regional and global
trade and security.
Kazakhstan’s recent accession to the World
Trade Organization and its participation in the
Eurasian Economic Union is evidence of the
country’s growing engagement in international
affairs. We are committed to developing economic
partnerships that will expand our trade and create
new opportunities for our economy. Regional
integration is also a key priority, which is why
we are working with our neighbors to improve
transport links across Central Asia.
This year, we commemorate 25 years since
the Semipalatinsk nuclear testing site was
closed. Nuclear disarmament continues to be
of great importance to us and we are working
tirelessly with the global community to stop
nuclear weapons tests and bring an end to the
proliferation of weapons of mass destruction.
The Atom Project (Abolish Testing, Our Mission) is
raising awareness of the human and environmental
devastation caused by nuclear weapons testing.
It is encouraging citizens to petition their leaders
in this regard, and already people from more than
100 countries have supported this call for action.
An important milestone in 2015 was the signing
of an agreement with the International Atomic
Energy Agency to set up a low-enriched uranium
(LEU) bank in Kazakhstan. Expected to begin
operations in 2017, the LEU bank will guarantee
the safe supply of low-enriched uranium to the
agency’s member states and will support the
peaceful development of nuclear energy.
It is this kind of leadership that will support
Kazakhstan’s bid to secure a seat as a non-
permanent member of the UN Security Council
2017-2018. We have the experience, political will
and resources to make a meaningful contribution
to addressing the challenges facing the UNSC.
As we are all aware, the world is facing
geopolitical tensions and turbulent conditions in
international financial markets. Strong leadership,
clear direction and cooperation are necessary
to overcome these challenges. I look forward to
strengthening dialogue with our international
partners and witnessing sustainable growth both
at home and abroad.
ERLAN IDRISSOV
Foreign Minister of the Republic of Kazakhstan
The country makes a significant
contribution to regional and
global trade and security
F
14. The U.S.-Kazakhstan Business Association (USKZBA) is an independent, non-profit organization that promotes
U.S. economic and commercial cooperation with Kazakhstan. Since 1999, USKZBA has engaged industry leaders
and policymakers from the United States and Kazakhstan to foster a positive business and investment climate in
Kazakhstan, one which enables companies to be productive and the country to grow and prosper.
Membership in the Association is open to businesses, trade associations, non-governmental organizations, trusts,
foundations, and individuals with a principal office or residence in the United States; others may be admitted at the
discretion of the Board of Directors.
Benefits of membership include invitations to members-only events featuring visiting Kazakhstani government
officials, representatives of regional organizations, and U.S. government officials; and access to exclusive analysis
of the business and investment climate in Kazakhstan and a network of investors, industry leaders and experts on
doing business in Kazakhstan.
Members-only events have included a reception and dinner in honor of President Nursultan Nazarbayev; regular
events on Capitol Hill for high-level Kazakhstani officials to meet with key Members of Congress; working
luncheons with Kazakhstani officials, Central Bank representatives, and the lead negotiator on Kazakhstan’s WTO
accession; briefings with U.S. Ambassadors to Kazakhstan and other senior U.S. government officials.
» Seek to understand and help shape policy directions that facilitate economic competitiveness and
a productive business climate in Kazakhstan through dialogue with U.S. and Kazakhstani
government leaders.
» Encourage dialogue between visiting Kazakhstani officials and U.S. government counterparts, and
host events at which the officials can meet with USKZBA members.
» Provide a forum for the exchange of views and information between U.S. and Kazakhstani business
and government leaders.
» Furnish timely information and analysis to members regarding the investment climate, business
practices, and governmental initiatives and policies in Kazakhstan.
» Be an effective, collective voice for U.S. business interests in Kazakhstan.
» Cooperate with other regional and international business organizations to foster economic growth in
Kazakhstan and throughout the Caspian and Eurasian regions.
» Promote awareness of Kazakhstan in the United States, in support of members’ business interests.
USKZBA OBJECTIVES:
Ambassador William Courtney (U.S. ret), President Sarah Frese, Executive Director
www.uskzba.org
For more information on Kazakhstan and its investment climate, or USKZBA membership
and activities, contact: uskzba@uskzba.org
15. 15
FOREWORD
INVEST IN KAZAKHSTAN 2016
ear friends, I am delighted
to welcome you to Invest in
Kazakhstan 2016.
Kazakhstan enjoys dynamic
strategic partnerships and
welcomes business from across the world.
International ratings confirm that it is one of
the most attractive emerging markets for doing
business. In the past decade, the country has
attracted $215 billion in foreign direct investments
(FDI), making it the largest recipient of FDI inflows
in Central Asia.
To build on this progress, President Nazarbayev
has launched ‘Plan for the Nation’ – a 100-point
blueprint to further develop and diversify the
economy and carry out political reform. Measures
outlined in this plan will cement Kazakhstan’s
reputation as an economic powerhouse and
regional trade hub, and bring it closer to joining
the ranks of the top 30 global economies by 2050.
Kazakhstan’s regional economic contributions
are steadily expanding. The New Silk Road
initiative, in particular, is driving the construction
and improvement of transport links that will
transform Kazakhstan from a landlocked country
into a ‘land-linked’ country, serving as a bridge
between Asia and Western Europe.
We are also supporting regional and
international projects in the energy sector.
Astana is finalizing preparations to host EXPO
2017, an international exhibition focused on
developing future energy ideas. It is hoped that
the EXPO will spur domestic innovation and the
use of advanced technologies.
In addition, the International Financial Center,
due to open in 2018 in Astana, will open up the
country’s banking sector to foreign investment.
It will provide a new court for financial and
investment dispute, governed by English law.
Maintaining and expanding relations with
partners such as the United States is a key facet of
our development agenda. The US is Kazakhstan’s
second-largest source of FDI. Moreover, in
November 2015 US Secretary of State John Kerry
made an official visit to Kazakhstan, during which
he expressed his support for the newly launched
Central Asia + the US (C5+1) framework, which will
promote stability and development in the region.
Kazakhstan’s accession to the World Trade
Organization will undoubtedly strengthen its ties
with global trading partners, as export barriers
are lifted and sectors such as telecommunications
become more open to foreign investment. I look
forward to seeing how partnerships evolve and
I encourage businesses to take advantage of the
myriad opportunities in Kazakhstan.
KAIRAT UMAROV
Ambassador of the Republic of Kazakhstan
to the United States
I encourage businesses to
take advantage of the myriad
opportunities in Kazakhstan
D
16. FOREWORD
INVEST IN KAZAKHSTAN 201616
ear friends,
Samruk-Kazyna comprises
the largest state-owned Kazakh
assets in strategic sectors such
as nuclear, mining, oil and gas,
communications, logistics and other industries. It
consists of more than 500 companies employing
more than 350,000 people. The Fund’s mission
states that asset optimisation and creating new
industries are its main goals.
In late 2014 Samruk-Kazyna launched a large-
scale transformation program announced by
President Nursultan Nazarbayev. Throughout 2015
the Fund conducted a comprehensive analysis of its
business processes and portfolio companies, and
in 2016 the transformation of the corporate center
and two major subsidiaries, KazMunayGas and
Kazakhstan Temir Zholy began. The companies’
organisational structures have been revamped
with priority given to business; all the functions
and processes are now designed to promote the
UMIRZAK SHUKEYEV
Chief Executive Officer, Samruk Kazyna JSC
D
17. 17
FOREWORD
INVEST IN KAZAKHSTAN 2016
The privatisation will reduce the number of
companies in the Group to 300, making the
holding’s structure much leaner
company’s successful growth on the market. So
far, the transformation has helped to create a new
employee grading system and a new concept of
procurement, to make a transition to a new format
of the Fund’s sponsorship role.
Naturally, the transformation of Samruk-
Kazyna began in a period of global crisis. The new
reality forces companies to be flexible, adapt to
changes and find reserves to win amongst fierce
competition. Our Fund is learning how to be leaner
and more flexible. The 2014-20 privatisation
program allows the Group’s companies to release
non-core assets and focus on their main areas of
business. In 2014-15, 38 assets were sold for a total
of more than $300 million, which can be invested
in new ventures. The privatisation will reduce the
number of companies in the roup to 300, making
the holding’s structure much leaner.
As part of the transformation, the Fund’s
investment strategy has been revised. It will be
based on two principles: long-term approach to
investment and greater efficiency of investment
in new industries that we will choose for the
company. A passive administrator in the past, the
Fund will now become an active investor. In this
regard, great changes are taking place in corporate
governance. In 2015 the Fund adopted a new
Corporate overnance Code, developed jointly
with the Organisation for Economic Co-operation
and Development in accordance with the best
international business standards. The new code
focuses on such key areas as company management
through professional boards of directors, risk
management, sustainable development, greater
transparency and fair treatment of shareholders.
We are convinced that the proclaimed principles,
properly implemented, will soon make our
companies sustainable and adaptable to change.
INTERNATIONAL PARTNERSHIPS
Despite the global recession, Samruk-Kazyna
continues to establish international business
relations. Since 2013 we have been cooperating
actively with the government and business
community of the United Kingdom, and with
the Portuguese authorities. The Fund actively
cooperates with international organisations such
as the Boao Forum for Asia, the World Economic
Forum and the International Forum of Sovereign
Wealth Funds (IFSWF).
Since 2013, the Fund has been co-chairing
regular meetings of the Kazakhstan-China
Business Council. Its third meeting in December
2013 in Beijing was attended by more than
500 representatives from the two countries’
government agencies and their biggest companies
and financial institutions. There are a number
of bilateral projects in the areas of innovation,
logistics and renewable energy currently underway.
The Fund also oversees the interaction of the
Kazakh business community with foreign business
circles under the auspices of the Kazakh-Korean
Business Council, Kazakh-Swiss
Business Council and Kazakh-
Spanish Business Council.
For many years our partners
have included major international
corporations, and we are ready to
develop productive cooperation at
an international level.
18.
19. THE
DIVERSIFICATION
WORLD TRADE
ORGANIZATION
MEMBERSHIP
November 2015:
Kazakhstan becomes the
162nd member of the WTO
President Nursultan Nazarbayev has
launched a new Plan for the Nation,
which aims to diversify the economy.
An ambitious wave of privatizations
forms part of this strategy. Investors
have been invited to purchase stakes
in 65 of the country's largest state-
owned companies.
Adding impetus to this plan is
Kazakhstan's recent accession
to the World Trade Organization
and the formation of the Eurasian
Economic Union.
DRIVE
EURASIAN ECONOMIC
UNION FORMATION
January 2015:
Led by Russia and Kazakhstan,
the EEU becomes active
20. THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 201620
azakhstan, which is celebrating its
25th anniversary as an independent
country, has drafted several
anti-crisis plans and is making
industrialization a cornerstone
of its economy. “A different era is about to start,”
President Nursultan Nazarbayev said in his most
recent State of the Nation address, hinting that
slower growth is only a sign of change.
Russia’s ruble crisis and the global
strengthening of the US dollar have hit commodity
prices, remittances and overall economies across
Central Asia. In the past 18 months, windfalls
from oil and gas sales have shrunk dramatically
and energy companies have had to abandon
projects in the Caspian region. Against this
negative economic backdrop, Kazakhstan’s
leadership has designed a set of reforms that
will allow the country to overcome current
hardships. After all, as Nazarbayev pointed
out, Kazakhstan has “successful experience
in overcoming economic difficulties”.
A TURNING POINT
In mid-2015, Nazarbayev unveiled the ‘100
Concrete Steps to Implement Five Institutional
Reforms’ program (also called Plan of the Nation),
which addresses specific issues and builds on the
country’s Nurly Zhol (Bright Path) stimulus plan,
drafted in 2014. The program’s ultimate goal is
to lead Kazakhstan into the 30 most developed
countries in the world by 2050.
A CLEAR PATH
A quiet revolution is taking place in Kazakhstan as the
government launches a series of reforms to stimulate
growth across industries, increase domestic
competition and expand global cooperation
As outlined in the plan, five institutional
reforms will modernize the public sector, assist
Kazakhstan's transition to a three-level justice
system, facilitate industrialization and economic
growth in sectors other than the extractive
industry, help develop the national identity and
strengthen the public sector’s accountability.
In the words of Foreign Minister Erlan Idrissov:
“a quiet revolution is taking place in Kazakhstan”.
Since January 2016, the Plan of the Nation has
lifted bureaucratic barriers to the development
of small and medium enterprises – an effort in
line with the country's joining of leading economic
blocs, such as the World Trade Organization (WTO)
and the Eurasian Economic Union.
It is not coincidental that Nazarbayev chose to
deliver his annual State of the Nation speech on
the day Kazakhstan joined the WTO. It is symbolic
of Kazakhstan's outreach and a will to further
integrate its economy both regionally and globally.
EASTERN VECTOR
Kazakhstan is located, both geographically and
diplomatically, at the center of the New Silk Road
– a project that major global powers are interested
in reviving. China in particular sees Kazakhstan
both as an important transit country for its goods
destined for Europe and as a reliable trade partner.
The success of Beijing’s ‘One Belt, One Road’
initiative, for example, requires Kazakhstan’s
cooperation. Both countries signed agreements
worth $24 billion in 2015, mostly geared towards
K
Astana's skyline has
changed dramatically
in recent years, with
urban development a
key tool in Kazakhstan's
drive to become one
of the world's 30 most
developed countries
23. LINTAOZHANG/AP/PAIMAGES
23
THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 2016
industrialization and improving logistics. Zhang
Hanhuey, China’s Ambassador to Kazakhstan,
said last year represented “the ‘boom’ of our
cooperation”. Enhanced cooperation with
its eastern neighbors could help Kazakhstan
protect itself from the negative impact of the
economic downturn that is affecting emerging
markets across the globe.
The extractive industry is still a crucial part of
Kazakhstan’s economy and new reforms in this
area will help this sector improve its flexibility
during an era of low commodity prices.
The coming online of the giant Kashagan
oilfield, the decision to build a new oil refinery
and the country’s first nuclear power plant, and
the reforms in the electricity market will boost
competitiveness in the local energy market and
strengthen Kazakhstan’s position as an important
regional and global supplier of hydrocarbons.
Diplomacy has played an important part in
the development of Kazakhstan’s energy sector
and last year was no exception. In October 2015,
Nazarbayev and his Russian counterpart Vladimir
Putin signed a breakthrough protocol for the joint
exploration of a Caspian oilfield. Only weeks
later, Nazarbayev flew to London and secured
contracts, mostly in the energy sector, worth
several billions of dollars.
The year 2017 will also mark an important
date for Kazakhstan’s efforts to reduce reliance on
fossil fuels and build a future on renewable energy
sources. EXPO 2017, to be held in Astana next year
under the theme 'Future Energy,' is testimony to
Kazakhstan’s commitment to ‘go green’.
PRIVATIZATION AND DIVERSIFICATION
Reforms have been designed to help fuel growth
in sectors other than the extractive industry. In
particular, the finance, agriculture, education and
tourism sectors are poised to expand substantially
over the coming years. Through the establishment
of new institutions and foreign direct investment
Kazakhstan will diversify and improve its market-
based economy in line with the most developed
economies in the world.
Indeed, since 2010, the manufacturing and
chemical industries have grown by 1.3 times
and 1.7 times respectively. In the same period,
production of engineering industry goods has
more than doubled and their exports have tripled.
The country's state-owned enterprises are
vast, accounting for around 40% of the country’s
gross domestic product. The privatization plan,
unveiled in October 2015, will see state enterprises
sell off shares in international markets, thus taking
a leap forward towards more transparent corporate
governance, increased domestic competition and
fruitful cooperation with global firms. Auctions will
be held for stakes in the many companies owned
and managed by Samruk-Kazyna, KazAgro and
Baiterek Holding.
With such changes in the economic landscape,
the new era appears to have begun.
President Nazarbayev
shakes hands with
Chinese President
Xi Jinping. In 2015, the
two countries signed
trade agreements
worth $24 billion
In the words of Foreign
Minister Erlan Idrissov:
“a quiet revolution is taking
place in Kazakhstan”
24. THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 201624
A NEW ERA
IN TRADE
RELATIONS
Accession to the World Trade Organization and
membership of the Eurasian Economic Union
are set to liberalize trade in Kazakhstan
I BALANCING TARIFFS
6.1%
Kazakhstan's
average import tariff
under WTO rules
10.6%
Average import tariff
within the EEU
n early 2015, the Eurasian Economic
Union (EEU) treaty entered into
force, signaling Kazakhstan’s intent to
stimulate economic integration within
the Commonwealth of Independent
States (CIS). Kazakhstan, Russia and Belarus, the
founding members of the EEU, were joined by
Armenia and, in August 2015, Kyrgyzstan.
Three months later, and after nearly two decades
of negotiations, Kazakhstan finally acceded to the
World Trade Organization (WTO), a move that crowns
the government’s efforts to integrate the country
into the global economy.
Undoubtedly, Kazakhstan’s agreement with the
WTO is a major achievement. President Nursultan
Nazarbayev called the accession to the WTO “a
milestone in the history of independent Kazakhstan”.
And Foreign Minister Erlan Idrissov said the success
in the negotiations shows “the country’s commitment
to building a world-class and diversified economy”.
The challenge now is balancing the requirements
of the WTO, the EEU and national economic interests.
Kazakhstan is the first member of the EEU to accede
to the WTO since the former came into existence on
1 January 2015. This means Kazakhstan’s bilateral
agreement with the WTO will affect the EEU.
Indeed, the WTO accession treaty specifically
tasks “Kazakhstan and/or the competent bodies
of the Eurasian Economic Union” with setting
new tariff barriers, as agreed by Kazakhstan
during the negotiations.
TRADE LIBERALIZATION
Kazakhstan had already set the tariff for over one
third of the WTO list of products at a level below
that of the EEU. Under WTO rules, Kazakhstan’s
average import tariff will be 6.1%, against the
EEU’s average of 10.6%. The EEU is eager to
follow Kazakhstan’s lead and lower tariffs
further to comply with WTO regulations.
In October 2014, Russian President Vladimir
Putin said that the EEU would work with the WTO.
And in October 2015, EEU heads of state indicated
that they wanted to harmonize their tariffs with
Kazakhstan’s new commitments. Russia, Armenia
and Kyrgyzstan were already members of the WTO
under different commitments.
Despite the progress made, there is still a lot of
work to do in the EEU to turn it into a powerful
regional economic bloc. The Union is still negotiating
a common export tariff and it has planned to delay
the regulation of energy trade until 2024. As long as
25. President Nursultan
Nazarbayev and World
Trade Organization
Director-General
Roberto Azevêdo
attend a ceremony
marking Kazakhstan's
membership of the WTO
25
THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 2016
these hurdles to trade are still in place, the EEU will
not be as effective as it wants to be.
OPENING THE DOOR TO COMPETITION
Domestically, Kazakhstan’s WTO accession meant
dropping several measures that favored local
companies. This is particularly important in
Kazakhstan’s extractive sector. Export subsidies
for agricultural products were also eliminated,
which sets an example for other developing
countries in the region.
Kazakhstan also had to abandon industrial
subsidies that are contingent upon export or on
the preferred use of domestic goods. Exports will
consequently not be favored by any of the former
rules that gave local companies a preferential path.
It is within this framework that Kazakhstan’s
Minister of National Economy Yerbolat Dossayev ruled
that the crude oil export tariff be made more flexible
in accordance with the global price of oil. Previously
seasonal and adjusted according to local production
and refining output, the oil export tariff will now be
‘unpegged’, in a similar way to the tenge.
Lastly, Kazakhstan’s agreement with the WTO
stipulates “price controls will not be used for the
purpose of affording protection to domestic products”.
Looking at Kazakhstan’s biggest international trade
partners, the European Union tops the list, followed by
Russia and China. The growing importance of non-FSU
states in Kazakhstan’s trade balance is an important
sign of the country’s ability to diversify its customer
base for exports and its foreign suppliers. The WTO
membership is set to catalyze the establishment
of new economic links.
STRONGER LINKS
Regional trade is crucial too. Kazakhstan is looking to
re-establish strong ties within the FSU region and the
formation of the EEU is a decisive step in this direction.
Membership of the WTO and EEU creates different
opportunities for Kazakhstan. With accession to the
WTO, Kazakhstan has essentially opened its market to
the world, slashing subsidies and promoting free trade.
The EEU signifies the creation of a new regional market
that could boost trade among commercial and political
partners that used to enjoy stronger ties.
WTO membership is one of Kazakhstan’s long-held
ambitions and a milestone in the country’s young
history. After the necessary harmonizing of WTO and
EEU rules, membership in both organizations will help
Kazakhstan achieve greater diversification and deeper
integration in the regional and global economy.
27. 27
THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 2016
n the past quarter
century, Kazakhstan has
transformed itself from
a stolid Communist-era
bureaucracy into one of
the world’s top 20 oil-producing countries,
home to an emerging, educated middle
class and, until recently, recording an
annual average gross domestic product
growth rate of 8.3%.
Faced with a perfect market storm
comprising the global oil price slump,
the negative impact of the sanctions
imposed on Russia following the Ukraine
crisis and the economic slowdown in
China, President Nursultan Nazarbayev
has pushed through an ambitious program
of reforms aimed at limiting Kazakhstan’s
reliance on hydrocarbons, and incentivizing
foreign direct investment (FDI) in Central
Asia’s largest economy.
PRIVATIZATION DRIVE
Central to that strategy is sovereign
wealth fund Samruk-Kazyna’s plan to
sell stakes of at least 25% in 43 state-
owned companies with a capital value of
2.5 trillion tenge ($8.1 billion) via initial
public offerings (IPO) in 2016-17.
The businesses due to go public include
the oil and gas company KazMunaiGas, the
uranium giant Kazatomprom, the railway
operator Kazakhstan Temir Zholy and the
mining firm Tau-Ken Samruk.
HIGH-OCTANE
OPPORTUNITIES
Ambitious privatization and market reforms combined
with a host of multi-sector investment opportunities
make this the ideal time for foreign companies
to secure a stake in Kazakhstan’s future
Stakes in electricity firms united under
the fund's Samruk-Energo division will also
be put up for sale and Samruk-Kazyna
has announced plans to privatize 182
"non-core assets" through auctions.
INVESTMENT TARGETS
“Labor costs in Kazakhstan have halved
thanks to tenge depreciation; this and the
continuously improving access to Russia’s
and China’s consumer markets provide
excellent FDI opportunities,” states Arnat
Abzhanov, the Chairman of Halyk Finance,
Kazakhstan's largest investment bank.
“Two companies stand out as strong
IPO-able stories in their current condition.
Kazatomprom enjoys some of the lowest
uranium production costs in the world,
robust operational cash flows and
predictable revenues due to long-term
forward off-take contracts for its uranium
concentrate sales.
“Recognized by international agencies
as the best company in Central Asia
INVESTMENT IN
NUMBERS
$24BN
Foreign direct
investments in
Kazakhstan in 2014
182
The number of
non-core assets that
Samruk-Kazyna plans
to privatize
$6.5BN
Total investment in
Kazakhstan by the
European Bank for
Reconstruction and
Development
Samruk-Kazyna has
announced plans to
privatize 182 “non-core
assets” through auctions
I
28. "The AIFC is
envisioned
to become
an analogue
of Dubai or
Singapore in
the CIS region in
terms of foreign
investments"
ARNAT ABZHANOV
CHAIRMAN,
HALYK FINANCE
HALYK
F
IN
ANCE
THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 201628
in 2012-15, Air Astana offers flights to
more than 60 domestic and international
destinations, has a strong management
team and certainly benefits from the
oil price plunge, which led to lower
air fuel expenses.
“Investors should also take a close
look at both National Company
KazMunaiGas (KMG) and Kazzinc.
KMG controls more than a quarter of
Kazakhstan’s oil and gas production and
has regular cash flows denominated in
foreign currency, an obvious benefit in
light of the substantial tenge depreciation.
“Kazzinc is a large copper, zinc and
gold producer controlled by Glencore.
The firm’s low leverage combined with
reduced production costs allows Kazzinc
to sustain a healthy EBITDA [earnings
before interest, taxes, depreciation and
amortization] margin.”
INCENTIVIZATION SCHEMES
The 2050 Strategy and the 100 Concrete
Steps (see page 30) plan unveiled by
President Nazarbayev in 2012 and 2015
respectively call for widespread economic,
social, judicial and political reforms.
The government has extended its
visa-free regime to 19 countries and is
offering a capital rebate of 30% after five
years for investments exceeding a certain
threshold. Investors are also exempted
from payment of the corporate income
tax and land tax for 10 years, and the
property tax for eight years.
“Kazakhstan’s status as an attractive
destination for FDI was underlined in 2015
when it climbed 12 points to 41st place in
the World Bank’s influential Doing Business
report,” says Janet Heckman, European
Bank for Reconstruction and Development
(EBRD) Director in Kazakhstan.
“As part of the Kazakhstan Government’s
Nurly Zhol countercyclical stimulation
policy, significant funds are being made
available for road upgrade and rail logistics
projects, airports and the major seaport
at Aktau on the Caspian Sea as well as for
various associated construction materials.
“Kazakhstan has enormous land mass
and myriad opportunities for investment in
agribusiness and secondary agribusiness.
The Kazakhstan Government is also
committed to the transition to the green
economy through the adoption of a
feed-in tariff law incentivizing investment
in renewable energy.”
Astana is preparing to host EXPO 2017,
where a global gathering will showcase
developments in green, renewable and
sustainable energy. The event is expected
to draw significant investment into
the country and stimulate long-term
sustainable economic development.
“Following the EXPO 2017 event, the
Kazakh Government plans to launch
the Astana International Financial Center
(AIFC) at the exhibition’s premises,” says
Arnat Abzhanov, Chairman of investment
bank Halyk Finance.
“The AIFC is envisioned to become
an analogue of Dubai or Singapore in the
Commonwealth of Independent States
region in terms of foreign investments,
public securities listings and a financial
court system governed by English law,”
Abzhanov continues.
“For listed securities, look for growth
stories like Halyk Bank, and for dividend
stories such as... KazTransOil, Kcell, KEGOC
and Kazakhtelecom,” he advises. “In the
equity universe, open positions in listed
companies as KMG E&P, Nostrum Oil &
Gas and KAZ Minerals once the commodity
cycle reverses.
“In the fixed income space, investors
should consider high-yield Eurobonds
out of Kazakhstan.”
WESTERN BUSINESS PRACTICES
In 2015, a one-stop shop for investment
was set up in Astana in collaboration
with PricewaterhouseCoopers to limit
administrative and bureaucratic barriers
in Kazakhstan. Meanwhile, EBRD is
working with financial lobbying group
TheCityUK to promote Western best
business practices.
“These include independent judiciaries
based on English law, the adoption of
English as the language of the financial
center, international judges, arbitration
in Kazakhstan through the financial
center, and best practices governing
capital markets, derivatives and corporate
governance,” says EBRD's Heckman.
By pushing through this raft of reforms,
Nazarbayev has signaled his intent to tackle
such issues and make good on his promise
to position Kazakhstan among the top 30
global economies by 2050.
p78
for more on the Astana
International Financial Centre
29. DELIOTTE PERSPECTIVE
Kazakhstan’s new
Entrepreneurship Code
As volatility of global commodity prices
continues to send shockwaves throughout
the global economy, the importance of
Kazakhstan’s stated goal of structural
economic diversification is placed in
even sharper focus.
Accepting that there are several
nonvariable and fundamental factors that
render Kazakhstan less attractive as a
destination for certain foreign investors (such
as the country’s geographic remoteness and a
small and widely dispersed population), the
government continues to push forward reform
and legislative innovation with a view to
creating an investment climate that is
increasingly attractive to investors.
Some of the principal components of
legislation targeted towards facilitating
value-driving new investment have, as of
1 January 2016, now been consolidated
into a new 'Entrepreneurship Code'.
The Entrepreneurship Code sets out three
categories of investment project:
• Investment projects;
• Priority investment projects; and,
• Strategic investment projects.
Under each type of investment project
qualifying investors are able to access a suite
of investment preferences and incentives
including both taxation based and nontaxation
based reliefs.
The non-taxation reliefs available are
primarily in the form of exemptions from
customs duties, access to state grant funding,
investment subsidies and the overarching
stability of the applicable investment regime.
Investors are able to determine the
appropriate nature of investment projects
and contractually secure their qualification
for all associated investment preferences
via the conclusion of an investment contract
with the Kazakhstan authorities.
The range and impact of incentives and
reliefs available increases in direct proportion
to the economic importance or strategic state
interest of the projects in question.
It should be noted that in the case of each
type of investment project, the preferences
and reliefs available are only accessible to
domestic investors (such as Kazakhstan
entities) who may be individuals or corporates.
It is, however, also important to emphasise
that local companies held by foreign
shareholders do qualify as Kazakhstan entities
and so are eligible to apply (subject to meeting
the other application criteria) for all associated
investment preferences.
Investment projects may involve a diverse
range of activities relating to the creation,
development or enhancement of production
operations, including public-private
partnership ventures.
Investment preferences available for
investment are limited to customs duties
exemptions and exemption from VAT on
imports in addition to the potential availability
of state material grant funding.
Priority investment projects
The first key point to note in relation to the
preferences available for priority investment
projects is that preferences are only available to:
a) Newly established entities;
b) Investments of in excess of
(approximately) $11.5 million.
The list of projects that qualify as priority
investment projects is set out in domestic
legislation but covers an extremely wide
range of activities in terms of (inter alia)
agribusiness, infrastructure, education,
healthcare, technology, construction,
pharmaceuticals, tourism, automotive
and chemicals.
The investment preferences available for
these types of projects include:
• Custom exemptions;
• Natural grants (being temporary and zero
cost transfers of land, buildings,
machinery and equipment, computers,
measuring and control instruments and
devices, vehicles (except passenger cars)
and industrial implements);
• Tax exemptions:
• Corporate income tax liabilities
reduced by a rate of up to 100%;
• A zero coefficient applied
to land tax rates;
• Property tax at 0%.
• Investment grants (reimbursement of up
to 30% of the actual costs of construction
and installation work and purchase of
equipment, excluding value added tax
and excise taxes).
Strategic investment projects
Strategic investment projects are defined as
those projects that significantly impact upon
the economic development of Kazakhstan.
The list of strategic investment projects
was originally determined by the Government
in 2009 (and is set out in Decree No.1293 of
1 September of the same year).
The total number of strategic investment
projects comprises 30 projects that mainly
relate to the construction and development of
strategic assets and interests in certain regions
of Kazakhstan, such as the reconstruction of
hydropower stations, heat power stations and
oil refineries; the construction of pipelines, gas
chemical facilities and others.
Strategic investment project preferences
include significant (and long-term) reliefs from
CIT, land tax and property tax and an overall
stability of the applicable investment
preference regime.
The application process for investment
preferences and procedure for concluding
associated investment contracts has also
been centralised within the Ministry of
Investment and Development where a
'one-stop-shop' approach has been put
in place to streamline and simplify all
associated application processes.
Article written by Anthony Mahon,
Tax Partner, Deloitte in Kazakhstan
Deloitte in Kazakhstan
36, Al-Farabi Ave, Almaty Financial District,
Almaty, 050059, Kazakhstan
T: +7 (727) 258 13 40 (42)
almaty@deloitte.kz | www.deloitte.kz
30. THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 201630
n May 2015, President
Nazarbayev unveiled
sweeping institutional
reforms aimed at
strengthening the
statehood of Kazakhstan and securing
its place among the world's top 30
economies by 2050.
Unprecedented in ambition and
scope, the five institutional reforms
and the 100 Concrete Steps to execute
them aim to advance professional
government apparatus; the rule of
law; industrialization and economic
growth; identity and unity; and, last
but not least, transparent and
accountable government.
Around two thirds of the changes
relate to business, including reducing
Kazakhstan’s reliance on fossil fuels
in favor of modern, diversified
energy provision that incentivizes
foreign investment.
ENERGIZING THE ECONOMY
Talking to Invest in Kazakhstan,
Almassadam Satkaliyev, Chairman
and CEO of leading energy provider
Samruk Energy JSC, explains that
“Renewable and alternative energy
sources will, by 2050, provide 50%
of Kazakhstan’s electricity.”
STEP CHANGE
resident Nazarbayev s five institutional reforms
and 100 Concrete Steps to implement them have
the potential to remodel Kazakhstan's economy
into one that is modern and market based
“This, coupled with the diversification
of the coal-dependent economy, is at
the core of the new policy initiatives.
“Step 50, entitled ‘Reorganization of
the electricity industry, implementation
of single purchaser model’, will smooth
out differences between electricity tariffs
in Kazakhstan’s regions
“Step 51, ‘Enlargement of regional
distribution companies’, will improve
the reliability of the power supply,
and reduce the cost of electricity
transmission in the regions and to
consumers," he explains.
“Step 52, entitled ‘Implementation
of the new tariff policy in the power
sector’, is designed to encourage long-
term transparency and investment
in Kazakhstan’s developing energy
industry,” adds Satkaliyev.
The introduction of a modern,
westernized capacity market system
will also ensure that there is sufficient
electricity generation capacity available
around the clock to meet projected
levels of demand.
“New power plants and
modernization of existing infrastructure
are both needed,” notes Satkaliyev. “The
replacement of the ‘cost-plus’ structure
I
31. 31
THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 2016
will not only encourage transparency
around electricity pricing, supply
and cost, but also increase investor
confidence in Kazakhstan’s capital-
intensive energy sector.”
CAPITAL GAINS
Steps 24 and 69-73 relate to the creation
of the Astana International Finance
Centre (AIFC). The new commercial hub
will be home to the National Bank, the
Kazakhstan Stock Exchange, a financial
court with international judges and a
legal framework based on English law.
Scheduled to begin operation in
January 2018, the AIFC aims to rank
among the top 10 Asian financial
centers and top 30 world financial
centers under the Global Financial
Centres Index by 2020.
The civil service reforms will
include target indicators for regulatory
authorities and performance-based
monitoring for civil servants, while
the establishment of an accountable
In brief: Kazakhstan’s
�ive institutional
reforms
1CREATION OF A MODERN
AND PROFESSIONAL
CIVIL SERVICE
• Developing meritocracy
in the civil service.
• New anti-corruption
measures and
Ethics Code.
• International managers
recruited from the
private sector.
2ENSURING THE
RULE OF LAW
• Creation of an impartial
judicial system.
• New arbitration court to
adjudicate on commercial
disputes.
• Establishment of AIFC with
legal framework based on
English law.
3INDUSTRIALIZATION AND
ECONOMIC GROWTH
• Support for small and
medium-sized enterprises
(SMEs) and scaling back
state-owned industrial sector.
• Kazakhstan as a
transcontinental transport
and regional logistics hub
between China and Europe.
4A UNIFIED NATION
FOR THE FUTURE
• The consolidation and
promotion of a Kazakh
identity.
5TRANSPARENCY AND
ACCOUNTABILITY OF
THE STATE
• Budget and public body
transparency.
• Local government
accountability with devolved
control over budgets.
state agenda includes open access to
statistical, budget and financial data
not protected by law.
Under ‘industrialization and economic
growth’, the Kazakh Government aims
to encourage strategic investment in the
agricultural and construction sectors
through amendments to the Land Code
and by replacing Soviet-era construction
norms and provisions (SNIP) with
‘Eurocode’ standards.
Implementation of the 100 steps
program began in earnest in January
with around 60 new laws entering into
force encompassing positive changes
in public service transparency and
accountability.
In an editorial published in July
2015 entitled Kazakhstan: 100 Steps
Toward a New Nation, Minister for
Foreign Affairs Erlan Idrissov confirmed
the government’s commitment to
institutional reforms.
“By setting a goal of becoming one
of the 30 most developed countries,
Kazakhstan has raised its sights very
high,” he stated. “This detailed program
shows that, despite the current storms,
the country is determined not to be
blown off course.”
33. 33
THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 2016
RAKHIM
OSHAKBAYEVFormer Vice Minister for Investment and Development
H
aving forged a successful career in
both the public and private sectors,
Rakhim Oshakbayev possesses an
intimate and unique understanding
of the Kazakhstan economy. Before
becoming Vice Minister, he was a Project Manager
for the International Finance Corporation, Director
General of the Analytical Center of Economic
Policy under the Ministry of Agriculture, Managing
Director of Kazakhstan’s Samruk-Kazyna National
Welfare Fund and, most recently, Deputy Chairman
of Atameken National Chamber of Entrepreneurs.
He has spent this spring in Washington, DC on
the Rumsfeld Fellowship program – a six-week
professional exchange at the Central Asia-Caucasus
Institute at Johns Hopkins University’s School of
Advance Studies.
Oshakbayev’s time as Vice Minister from August
2015 to this March coincided with the downturn in
crude oil prices. When asked what were the three
most important implications of this dramatic fall,
he notes “the high volatility of the exchange rate;
the weak state of the financial sector, including
the limited availability of credit; and the rising
non-oil deficit in the state budget”. He adds that,
unfortunately, “these developments are felt most
strongly by small and medium enterprises (SMEs)”.
With respect to the exchange rate, Kazakhstan’s
National Bank at first tried to maintain a fixed
exchange rate, but developments in Russia
and around the world exerted pressures on
Kazakhstan’s economy that ultimately forced the
Bank to readjust its monetary model in August
2015. The Central Bank of Kazakhstan moved
the tenge from a managed float to a free-float.
Consequently, the average monthly exchange
rate swung from 187 KZT/USD in July 2015 to
345 KZT/USD in March 2016.
During the summer of 2015, the ruble continued
to depreciate under pressure from falling oil prices.
While the average ruble/dollar exchange rate in
INTERVIEWINTERVIEW
June 2014 was 34.39, by June 2015 it was 54.59.
In the same period, the average Kazakh tenge
(KZT)/dollar exchange rate rose only slightly,
from 181.48 to 183.61. This created a disparity
that discouraged SMEs in Kazakhstan from using
locally manufactured products, as cheaper Russian
equivalents were favored. More importantly, as
Oshakbayev emphasizes: “It became harder for
Kazakh SMEs to continue normal business with
their Russian partners.”
Meanwhile, the Chinese economy began to
show signs of stagnated growth. Beyond financial
indicators, the weaker tenge reduced government
budget revenues, forcing it to rebalance the 2016
budget based on an average oil price of $30 per
barrel, down from the original $90. The collapse
in world oil prices also prompted the government
to tap into the National Fund. “According to March
2016 statistics published by the National Bank of
Kazakhstan, the total value of the National Fund
amounted to $64.3 billion, which is 17% less than
its August 2014 level of $77.2 billion,” Oshakbayev
points out, adding that, even in 2016, “Fifty-seven
percent of state budget will be covered by oil-
related revenues.”
These factors – the fall in global oil prices, and
economic recessions with Kazakhstan’s primary
trading partners Russia and China – created
monetary, structural and financial volatility and
ultimately prompted the move to free-float the
tenge in August 2015. However, Oshakbayev
stresses that, in spite of the short-term volatility,
this move was necessary for the long-term
development of Kazakhstan’s financial system.
THE LONG-TERM PICTURE
Notwithstanding the developments in 2014-15,
Oshakbayev notes that Kazakhstan’s financial
sector still faces serious, long-term challenges.
First, while the state has successfully reduced the
amount of non-performing loans (NPLs) on banks’
34. THE DIVERSIFICATION DRIVE
INVEST IN KAZAKHSTAN 201634
balance sheets from 35% in 2013 to around 8% in
the last quarter of 2015, additional measures must
be taken to ensure long-term financial stability, as
many of the underlying assets are of poor quality.
The NPL cleaning process has also pressured
banks’ capital ratios.
“The growth of money supply actually stopped
in mid-2013, and since mid-2014 has decreased by
1.5 trillion tenge or almost 20%,” says Oshakbayev.
“Lending in the economy has fallen by 357 billion
tenge since January 2015 while interest rates,
denominated in tenge, have sharply increased from
10% to 19.1%, in line with monetary pressures in
order to cover risk premiums.”
The recent uncertainty has provided an
impetus for diversification and new economic
development policy. As Vice Minister, Oshakbayev
helped to conceive several state programs and
roadmaps, emphasizing the importance of
development based on trade liberalization, a
reduction in state participation in the economy,
and recognition of the need to foster SMEs and
human capital development. In one industry-
focused program, Oshakbayev set out to improve
the investment climate and change the state
from an active participant to a more supportive
role that interferes minimally with natural
market processes. His approach to policymaking
was driven by his experience in business. “As a
former representative of Kazakhstan’s business
community, I know the importance of financial and
structural conditions," says Oshakbayev. “Arguably,
these factors are more important than state
programs themselves.”
Oshakbayev also sought to eliminate barriers
and bottlenecks for the manufacturing industry,
particularly with respect to market-access and
Oshakbayev is optimistic
about the future stabilization
and development of
Kazakhstan’s economy
achieving a regional competitive advantage with
respect to costs. He opposed programs that use
taxpayer funds to support a particular business
entity and therefore distort free-market by
eliminating competition.
“While it is important for the government
to support business, it is also important for the
government to allow free market forces to work.
Supporting weak and failing enterprises with
low investment returns that have substantial
market share not only impedes macroeconomic
growth, but presents a barrier to entry for smaller,
independent and potentially more efficient actors
to gain market entry.”
SIGNIFICANT REFORMS
Oshakbayev is optimistic regarding the future
stabilization and development of Kazakhstan’s
economy. The country's ranking on the World
Bank’s Doing Business Index has consistently
improved over the past few years, reaching
the 41st spot in 2015, and there is a genuine
willingness and desire by government officials
to implement significant reforms. President
of Kazakhstan Nursultan Nazarbayev recently
adopted the so-called Plan of the Nation, ‘100
Concrete Steps to Implement Five Institutional
Reforms’, which prioritizes the creation of a
modern and professional civil service, upholds
the rule of law, advances industrialization and
economic growth, and advocates measures to
ensure the state’s transparency and accountability.
“Overall, Kazakhstan’s economy has achieved
enormous success since 1991,” Oshakbayev says
confidently. No country experiences a perfect
growth trajectory, and Kazakhstan certainly
has significant challenges ahead. But, according
to Oshakbayev,
these problems
are normal for
an upper-middle
income developing
economy, and can
be solved as long
as the country
remains willing,
open and eager
to realize the
necessary reforms.
“We still have work
to do,” he says.
35. THE NEW
more container trains
transited through
Kazakhstan in 2015
than in 2014
Launched in November 2014,
the Nurly Zhol economic policy
seeks to revive the Silk Road
and transform Kazakhstan into
a major conduit for trade. New
railway lines, roads, pipelines
and logistic terminals are under
construction and existing ones
are undergoing improvement to
encourage freight traffic from Asia
to Europe and the Middle East,
through Kazakhstan.
China is playing a lead role in
delivering these infrastructure
projects, under the auspices of the
‘One Belt, One Road’ initiative.
This is giving new impetus to
bilateral relations between
China and Kazakhstan, with both
countries investing heavily in the
modernization of transport assets
along the New Silk Road.
SILKROAD
1.7m
TEUs
The volume of
containerized
cargo expected
to pass between
Asia and Europe
via Kazakhstan
annually by 2020
57%
36. THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 201636
J
a further $10 billion from a BRICs-led
New Development Bank. As part of Nurly
Zhol, Kazakhstan itself has pledged to pour
$9 billion into infrastructure in the country.
The potential for boosting trade between
Kazakhstan and China alone is enormous.
CHINA-EU TRADE
Kazakhstan Temir Zholy (KTZ), the
state railway company, has invested
$900 million in the Khorgos dry port
and hopes to capture 6% of the trade
between China and Europe by 2020.
Currently, 98% of this trade goes by sea.
The new road and rail links will also
provide a massive boost for Kazakhstan’s
other sectors. Perishable goods such as
fruit and vegetables, for example, will
have a viable way of reaching profitable
European markets. A key aim of Nurly Zhol
is to help diversify the Kazakh economy
away from its heavy reliance on the
extractive industries.
Meanwhile, Nazarbayev is determined
not to ignore any of his landlocked
nation’s potential trading partners. In an
article published in The Financial Times
in November 2015, Nazarbayev wrote:
“We have very good relations with our
neighbors Russia and China, Europe is our
biggest trading partner and we count the
ust four years ago a Chinese
academic’s vision of a new
Silk Road linking China to
Europe seemed fanciful
to observers in the west.
But within a year, Chinese President Xi
Jinping was in Central Asia proposing
Wang Jisi’s ambitious vision under a
broader project named ‘One Belt, One
Road’, which promised transportation
links through Kazakhstan to Europe,
but also included economic development
along its route and further maritime links
from China to South-East Asia.
Not only did Kazakhstan embrace the
idea, but a year later President Nursultan
Nazarbayev announced Kazakhstan’s own
massive infrastructure development plan:
'Nurly Zhol', or 'Bright Path'. Nurly Zhol
provides for roads and other transport
facilities that will link up the rest of the
country with the New Silk Road route
in the south of Kazakhstan, which runs
through Almaty to the west. It will also
ensure investment in key projects along
the Silk Road route, such as massive
expansion of the Khorgos dry port
transhipment area (see page 44).
Already, the modern caravan has started
rolling along the New Silk Road. Although
the road sections of the two countries’
PAVING THE
WAY FOR TRADE
Kazakhstans Nurly hol program and Chinas One Belt,
One Road’ initiative share a vision that will transform
Kazakhstan into a major trade hub
visions have still to be completed, in 2015
the Port of Rotterdam welcomed its first
arrival by rail of containers from China. The
rail route has shortened the journey time
for goods from China to 14 days, against
the average of 60 days that the journey
would have taken by sea.
Nazarbayev announced at the beginning
of this year that the road route of the New
Silk Road through Kazakhstan would be
completed by the end of December.
These developments have not
come cheap. The Chinese government
announced several financial commitments,
including a $40 billion Silk Road Fund
to be focused on projects in the Central
Asian region. This is also being supported
by $50 billion in funds from the Asian
Infrastructure Investment Bank – a
China-led development institution that
has 57 founding governments – and
The potential for
boosting trade between
Kazakhstan and China
alone is enormous
37. CHINAFOTOPRESS/CHINAFOTOPRESSVIAGETTYIMAGES
37
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 2016
The inauguration
ceremony of the China-
Europe Block Train,
which took 21 days
to travel from Yiwu to
Madrid via Kazakhstan
RAPID TRANSIT
New Silk Road rail links
have reduced shipment
times between China
and Rotterdam
United States as a strong friend. We remain
determined to put trade and multilateral
cooperation, not geopolitics, at the center
of international relations.”
THE INTERNATIONAL STAGE
Kazakhstan has just joined the World
Trade Organization, and hopes to gain
membership of the Organisation for
Economic Co-operation and Development
(OECD). The country is a member of the
Shanghai Cooperation Organisation – a
grouping whose core members include
China, Kazakhstan, Russia and other
Central Asian republics – as well as being
a member of the Eurasian Economic Union,
which was originally signed by Belarus,
Kazakhstan and Russia, who have since been
joined by Armenia and Kyrgyzstan.
With EXPO 2017 just around the corner,
however, Kazakhstan is looking to the west
to underpin its ambitious aim to develop
a world-class financial center. The Astana
International Finance Centre, announced
by Nazarbayev in 2015, is proposing not
only tax incentives for foreign participants,
but also that business dealings in the
special economic zone will be governed
by English law and adjudicated by an
independent English judiciary.
14days
by rail
60days
by sea
38. Towards
Russia
Towards
Ukraine and
Germany
Towards
Turkmenistan
and Iran
Towards Uzbekistan,
Turkmenistan and Iran
Baku Port
Alat
Aktobe
Kandagash
Beineu
Uralsk
The National
Industrial
Petrochemical
Technological Park
Atyrau
Kashagan oilfield
Port of Aktau
RUSSIA
TURKMENISTAN
UZBEKISTAN
Caspian Sea
IR AN
5
2
2
4
4
2
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 201638
he scale of Kazakhstan’s
challenges are matched
by its ambitions. The
landlocked nation is the
ninth-largest country
in the world and it is also a commodity
exporter, relying for the majority
of its revenues on the export of oil
and gas, metals, chemicals and
agricultural produce.
But to develop its industries and
to diversify into new sectors that will
leave it less vulnerable to commodity-
price fluctuations, it needs to upgrade
its infrastructure. Poor infrastructure
has been one of the complaints put
forward by foreign investors, who have
often had to invest in their own in and
around their projects.
AMBITIOUS SPENDING PLANS
All that is changing, however, and
fast. As part of Kazakhstan’s Nurly
Zhol new economic policy, outlined
by President Nursultan Nazarbayev
in 2014, spending on infrastructure
is being given top priority.
The vision was ambitious, especially
so because the price of oil had already
fallen from a high of above $100 a barrel
to around $80 – a level from which it
continued to fall. However, Kazakhstan
has allocated money that it accumulated
in its sovereign wealth fund and is
holding its nerve.
THESTRATEGY
TAKES SHAPE
Infrastructure projects along the New Silk Road are
gathering steam, bolstered by Kazakhstans Nurly hol
economic policy and Chinas One Belt, One Road initiative
T
Electricity, oil pipeline, rail and road
infrastructure projects all form part
of Nurly Zhol; use this map to visualize
those discussed in the next two articles
Key:
Railway lines
Roads
Power lines
Oil pipeline
39. Towards iwu,
China
Towards
Tashkent,
Kyrgyzstan
Semey
Ust-Kamenogorsk
Towards
ianyungang,
China
Pavlodar
Sayak
Shu
Elkbastuz
Kostanay
Arkalyk
Karaganda
Zhezkazgan
Shubarkol
Petrioavlovsk
Kyzylorda
Taldykorgan
Balkhash
Shymkent
Aktogay
Arys
EXPO 2017 site and
Astana Airport
Chemical Park
Taraz
Dostyk
International
border crossing
Khorgos-Eastern
Gateway dry port
complex
Almaty
CHINAK YRGYZSTAN
3
6
3 1
2
4
1
1
2
2
2
3
3
4
1
39
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 2016
Railway lines
1 Arkalyk-Shubarkol
2 Lianyungang (China)-Dostyk-
Duisburg (Germany)
3 Lianyungang-Almaty-Tashkent
(Uzbekistan)
4 Trans-Caspian International
Transport Route: Shihezi (China)-
Dostyk-Zhezkazgan-Beineu-
Aktau-Alat (Azerbaijan)
Roads
1 Almaty-Ust Kamenogorsk
(South East-North East)
2 Astana-Aktobe-Atyrau-Aktau
(Central-West)
3 Astana-Almaty (Central-South)
4 Astana-Ust Kamenogorsk
(Central-East)
5 Atyrau-Astrakhan (West-Russia)
6 Karaganda-Zhezkazgan-
Kyzylorda (East-Central-South)
Power lines
1 Almaty-Balkhash
2 Elkbastuz-Semey-
Ust Kamenogorsk
3 Semey-Aktogay-
Taldykorgan-Almaty
Oil pipeline
1 Beineu-Bozoi-Shymkent
40. getransportation.com
The GE Evolution Series Locomotive is one of GE Transportation’s most technologically
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Imagination at work
Adaptable, Flexible, Powerful
41. 41
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 2016
Providing a massive boost to its
ambitions is Kazakhstan’s enviable
geographical position sandwiched between
China, the world’s largest manufacturer,
and Europe, the largest consumer
market. Chinese President Xi Jinping’s
announcement of the ‘One Belt, One Road’
– an adaptation of the historical Silk Road
providing not only new roads but also
investment in projects along its route –
is offering another source of funding for
Kazakhstan’s infrastructure.
LINKING CHINA TO EUROPE
First up on the New Silk Road’s progress
through Kazakhstan is construction of
phase two of the dry port complex of the
transport and logistics zone on the Kazakh-
Chinese border – the so-called Khorgos-
Eastern Gate – which is expected to be
completed later this year. The port expects
to handle 200,000 containers annually in
2016, and 500,000 annually by 2020.
Road projects generally have been
given top priority. These include sections
of the New Silk Road linking China and
Western Europe, but also Astana-Almaty
(Central-South); Astana-Ust Kamenogorsk
(Central-East); Astana-Aktobe-Atyrau-
Aktau (Central-West); Almaty-Ust
Kamenogorsk (South East-North East);
Karaganda-Zhezkazgan-Kyzylorda (East-
Central-South); and Atyrau-Astrakhan
(West-Russia). (See map for a visualization
of the roads). Construction is continuing
and 7,100 km of roads will have been built
or reconstructed by 2020 under Nurly Zhol.
The latest data from the Ministry for
Investments and Development indicate that
since the beginning of the project, more
than 1,800 km of the route has already
been completed. Nazarbayev announced
in February that the work was scheduled
for completion by the end of this year.
Having already won the right to
host EXPO 2017, Kazakhstan has also
earmarked money for projects that will
support the influx of visitors, such as the
construction of a new airport terminal at
Astana and reconstruction of the runway.
The old passenger terminal at Astana has
already been demolished to make way
for construction of the new building and
the work is scheduled for completion
before EXPO 2017.
Work continues at the National
Industrial Petrochemical Technological
Park in Atyrau, in the west of Kazakhstan,
and the Chemical Park in Taraz in the
south, near the border with Kyrgyzstan –
part of Kazakhstan’s plan to diversify its
economy away from oil.
However, oil is still of crucial importance
to Kazakhstan’s economy. Commercial
production at the Kashagan oilfield is set
to begin in late 2016 and the expansion of
the Caspian Pipeline has been completed.
Work on the Beineu-Bozoi-Shymkent
gas pipeline is set to be completed by
December 2017 (see map).
Energy infrastructure has also been
given priority, particularly two projects:
the construction of high-voltage lines
linking Eklbastuz-Semey-Ust Kamenogorsk
and a further project linking Semey-
Aktogay-Taldykorgan-Almaty. A 322-km
overhead line bringing a stable supply of
electricity to Almaty from the Balkhash
thermal power plant was completed at
the end of April last year (see map).
Major modernization work continues
on Kazakhstan's railways, which will
connect north to south and east to west.
The European Bank for Reconstruction
and Development (EBRD) organized a
syndicated financing package last year
for Kazakhstan Temir Zholy, the country’s
rail operator.
But talk to any foreign businessmen
who have visited Kazakhstan in the past
two years, and they will tell you that
the country is focusing on EXPO 2017,
the theme of which is Kazakhstan’s
commitment to ‘greening’ its economy,
and that any building project associated
with the expected arrival of five million
visitors is being given top priority.
Major modernization
work continues on
Kazakhstan's railways,
which will connect north
to south and east to west
The construction
of a new terminal
and reconstruction
of a runway at
Astana International
Airport will bring
its annual capacity
to seven million
passengers by 2017
ASTANAINTERNATIONALAIRPORT
42. THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 201642
round a century ago, the
Trans-Siberian Railway
was Central Asia’s sole
choice for rail exports.
Today, direct cargo trains
move regularly between a rapidly rising
number of cities across Kazakhstan, China,
Eurasia and Europe. As Chinese rail routes
grow westward, trade between China,
Kazakhstan and Central Asia is booming.
Today, shippers to and from China
enjoy a growing range of route choices,
streamlined customs rules and faster
crossing times. For Kazakhstan, the largest
landlocked country on the planet, rail
connections are playing a big role in its
effort to position itself as an efficient and
fast transit bridge.
Kazakhstan is seeking to attract as
much land-based China-Europe trade as
possible. The expansion of Kazakhstan’s
rail networks, the modernization of
its stations and infrastructure and the
development of transnational container
shipping are all helping it establish a
competitive position.
Kazakhstan is the vital overland
link for China’s ‘Belt and Road Initiative’.
The new China-Europe Silk Road and
the trains that travel its routes are
RAIL RENAISSANCE
IN EURASIA
Kazakhstan’s expanding railway network is
creating newer and faster routes between China,
Central Asia, Europe and the ersian ulf
leading a renaissance in the regional
transcontinental rail transport sector.
Twelve Chinese and nine European cities
now serve as hubs for these 12,000 km or
more direct transcontinental train lines.
A test container train recently transited
Kazakh territory from Iran to the eastern
Chinese city of Yiwu. The new route will
be the first to speed cargo deliveries
from eastern China to Gulf markets via
Kazakhstan. It will cross the Chinese-
Kazakh Alashankou-Dostyk border station,
and will then go through Kazakhstan
into Turkmenistan and Iran. The line will
stretch over more than 9,000 km, with a
transit time of 10 days – three times less
than the present maritime route.
On 14 January 2016, Kazakhstan
agreed on preferential cargo tariff rates
with Azerbaijan, Georgia and Ukraine
A
for shipments via the Trans-Caspian
International Transport Route. The
signatories of the related protocol also
promised to take comprehensive steps
to facilitate movement on the route and
boost cargo turnover.
BETTING ON RAIL
The Trans-Caspian route traverses
China, Kazakhstan, Azerbaijan, Georgia
and Turkey and continues on to Europe.
It is an instrumental part of the New Silk
Road program as well as the Nurly Zhol
economic plan.
The route uses Kazakhstan’s new
Zhezkazgan-Beineu line, the Aktau
Port, as well as the Georgia-Turkey
Akhalkalaki-Kars railway.
On 3 August 2015, the ‘Nomad Express’
test container arrived by ferry at Baku
International Sea Port in Alat from Aktau
Seaport. The container started from
Shihezi, China, and took five days to travel
more than 3,500 km to the Aktau Caspian
Sea Port via the Dostyk crossing, before
being loaded on to the ferry to Alat.
Prime Minister Karim Massimov ended
his most recent trip to China in December
2015 by launching the first container
train on the Lianyungang route, which
Kazakhstan is seeking
to attract as much
land-based China-Europe
trade as possible
43. KHORGOSGATEWAY
43
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 2016
continues through Kazakhstan, Russia and
Belarus and ends in Duisburg, Germany.
While there, he inspected the joint Kazakh-
Chinese logistics terminal at Lianyungang.
A regular container service is also set to
run to Almaty and Tashkent in Uzbekistan
as well as to the Caucasian region.
Specifically, three container trains will start
deliveries to these locations early this year,
and will later increase to five trains.
In yet another related development,
during a recent meeting between railway
officials from Iran, Turkmenistan and
Kazakhstan, the three parties pledged
to reduce transport tariffs and boost
mutual trade. The Iran-Turkmenistan-
Kazakhstan railway is one of the most
central economic initiatives of Eurasian
intergovernmental grouping the Economic
Cooperation Organization. It was launched
in 2014 and links the eastern coast of the
Caspian Sea to the western sea coast and
the Persian Gulf.
In addition, in September 2015, national
rail company Kazakhstan Temir Zholy JSC
(KTZ) said the country would overhaul
eight railway stations across the country.
The company had already completed the
refurbishment of another nine stations in
2015, a company message states.
The container yard
at Khorgos Gateway
on the border with
China. Kazakhstan is
upgrading its railway
network and regulatory
environment to
strengthen its position
as a transit state
Railway stations are typically renewed
annually to enhance infrastructure and
passenger services. However, this year,
as the rail sector grows in importance,
the stations’ facades, roofs, interior
and exteriors will all be redone, their
landscapes beautified, and their utility
systems repaired.
THE EURASIAN LAND BRIDGE
In August 2015, KTZ also said it would
transit 42,000 containers overall via the
China-Europe-China route, a level that is
almost 40 times greater than in 2011.
KTZ President Askar Mamin said during
a special session dedicated to Transport
Workers’ Day that the growing container
transport volume moving from China to
Europe and the other way around during
2014 led to a 13.7% increase in company
revenue compared with the year before.
"Transit traffic accounted for 25% of
the company’s total revenues," Mamin
noted. “The goal is to increase this figure
to 50% over the medium-term."
In the summer of 2015, the European
Bank for Reconstruction and Development
(EBRD) said it would provide $300 million
together with a group of international
banks to help modernize and restructure
KTZ. $150 million will come from EBRD
and the remaining $150 million will be
syndicated via the banks. The funds will
refinance KTZ's Eurobonds, and the EBRD
will work with KTZ to reform the tariff
system as well as transform the company’s
business operations.
EBRD Managing Director for Turkey
and Central Asia, Natalia Khanjenkova,
said KTZ would continue to adopt
sustainable energy technology, which
has been an ongoing part of their long-
term cooperation plan. Khanjenkova noted
that the syndicated financing package
demonstrates confidence from investors,
both in KTZ and in Kazakhstan.
p38for map of key rail
routes in Kazakhstan
44. QA&Q&QA&AQ
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 201644
he Panfilov District, in the
far southeast corner of the
Almaty Oblast near the
Chinese border, might at
first seem to be the edge of
the world. And indeed it was until around
five years ago for transnational shippers
going east to west or vice versa, due to the
different rail gauges on the Chinese and
Kazakh sides of the border.
But today, a colossal new trade capital
is rapidly forming in this once barren
outpost in the town of Zharkent, and with
the pace of its current transformation,
the area will not be recognizable in a
few short years.
Karl Gheysen, Chief Executive at
the Khorgos Gateway SEZ, is helping
to build this new gate connecting
east and west. DP World manages
Khorgos East Gate via an agreement
with Kazakhstan Temir Zholy JSC, the
KARL GHEYSENChief Executive Officer, Khorgos ateway
country’s national railway company, and
Khorgos is poised to make Kazakhstan
the most important regional shipping
state – not just for Central Asia, but for
the entire Eurasian continent.
Q. How did the idea for the Khorgos Eastern
Gate come about and how does the DP World
contract work?
President Nursultan Nazarbayev had the
idea for the Silk Road 15 years ago, and
he asked President of Kazakhstan Temir
Zholy JSC Askar Mamin to set up a trade
corridor going through the Khorgos pass.
The President knew a long time ago that
Kazakhstan was well positioned to act
as a rail bridge from east to west. After
doing some analysis, Mr Mamin decided
to approach DP World as he knew what
we had done for Dubai. We were very
enthusiastic and saw the potential to
help transform Khorgos right away.
T
45. 45
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 2016
DP World [works] on a management
contract. We provide guidance on how best
to develop the economic zone, the dry port
and things like that. [Khorgos] is a 100%
Kazakh-owned government project. It is
100% owned by Kazakhstan Temir Zholy.
Q. How would you describe the Khorgos
Eastern Gate and its goals?
What Kazakhstan is trying to do is kind
of a mini version of the historic evolution
of Dubai. But we didn’t come just to make
containers move in an efficient way. The
reason we came is the concept of having
a port and a free zone combined. That’s
what you have in Dubai.
Next to the port [of Dubai], the Sheikh
of Dubai developed an economic zone with
all the normal benefits. But they were one
of the first to do it on such a scale. And
because the economic zone developed,
the port started developing, because they
needed to feed into that economic zone.
Because the port was growing, the zone
was growing. They cross-fed each other.
That was the master plan. The big boom
we see now – that started 25 years ago.
With the Silk Road, this is what we are
doing at the border of Kazakhstan. You have
trains coming from China, and they come to
Europe in one transit zone. Then you have
an ‘event’, because there is a change in the
gauge, which means there is an interruption
in your chain. Even if it’s a one-minute
interruption, it’s an event, and you have
to change the trains to a different rail.
The project, the vision, is really the
dream of President Nazarbayev. Along with
making the new capital, he wanted to have
the Silk Road. His plans coincided with the
Chinese ‘One Belt, One Road’ initiative.
What Kazakhstan wants to do is create an
east-west corridor. Based on that corridor,
they want to develop a new market – a new
region. They want to position Central Asia
as a destination, not just as a transit place.
Q. How would you describe the greatest
benefits of the corridor
By giving you the real example of the
Toyota Motor Company. Toyota’s cars are
all made in the Japan region. From this
region, they go to one deep seaport in China,
where they consolidate all the cars. From
there they put all the cars on a ship, from
the east side of China. By sea you go below
India, through the Suez Canal, through the
Mediterranean, around Spain, through
the channel between England and Belgium.
Then you go all the way up to Finland, and
in Finland you offload the cars. That’s how
they supply Europe. In Finland they put
them on a rail car. From Finland, they go by
rail across the border to St Petersburg and
to Moscow. They go from Moscow down to
Kazakhstan, and the regional distributor
for Toyota in Almaty. If you show that on
the map, you’ve done a tour of the world.
And, up until five months ago, that is how
they supplied Kazakhstan. Up until recently
that was the most cost-efficient and safe
way to supply Kazakhstan. You circle all the
way around until you almost reach where
you started. And it’s so obvious to see that
if you just make that link, it’s done.
The first target is the corridor going
straight from east to west, because it’s
much more efficient than going by sea to
Europe. Going by ship from Japan to Europe
takes 45 days. Going by train takes 14 days.
Q. What about cost effectiveness?
If you go from port to port, sea freight is
always cheaper. But goods are not made at
the port, and people don’t live at the port.
It’s much faster going by rail to Europe. And
if you take pre-carriage and on-carriage
[time-related costs], then the prices level
out and you go much faster.
hat about the Eastern ate itself,
for investors and shippers?
Simply said, it is a free zone, where people
have no VAT, no taxes, all the benefits like
that. People who invest in warehouses get
a free land lease for 10 years, all the normal
advantages that any economic zone in the
Russia is the biggest country.
India has one of the largest
populations,Chinahasone of
the biggest markets and in the
middle of all that is Kazakhstan
46. The first Kazakhstani private shipping company “Caspian Offshore Construction” LLP was established in 2003. The Company focuses
on the development of auxiliary infrastructural marine fleet involved in the development of oil and gas fields in the Caspian Sea. The
Company offers a wide range of services in vessel management, operation and maintenance, as well as supervision of construction
of new and modernization of existing vessels.
The Company manages total fleet of 41 vessels.
Company fleet is certified in accordance with ISM Code, while Company’s Quality and Environmental Management Systems are
approved and certified by Intertek in compliance with ISO 9001:2008 and ISO 14001:2004 standards.
Almaty office: 34/95, Karasai Batyr street, Almaty 050010
Republic of Kazakhstan
Telephone: +7 7272 59 73 33
Aktay office: 39 building, “Zodiak” business-center,
17 mcr., 130000 Aktau, Republic of Kazakhstan
Telephone: +7 7292 59 73 33
Widening horizons.
Establishing traditions.
www.coc.kz
47. 47
THE NEW SILK ROAD
INVEST IN KAZAKHSTAN 2016
world has, but Kazakhstan also has its
location. That’s the real selling point.
Which manufacturers will come here?
For one, the Chinese companies will do
final assembly at Khorgos, and then the
product becomes ‘Made in Kazakhstan’. So
legally, your product is made in Kazakhstan.
If your product gets the stamp – Made in
Kazakhstan – you are inside the Eurasian
Economic Union, which is Kazakhstan,
Kyrgyzstan, Russia, Belarus and Armenia,
the whole Customs Union. You have direct
access to that whole region.
The New Silk Way is not just one road;
it is a concept of interconnected corridors.
Kazakhstan is now making a logistics
center [around those corridors]. The
Port of Aktau is also developing. We are
creating corridors to Iran, Turkey, Europe,
Finland and the Baltic States. It’s all about
connecting all of these corridors together.
If you look at the map of this part of the
world, Russia is the biggest country. India
has one of the largest populations and
China has one of the biggest markets, and
in the middle of all that is Kazakhstan. In
the middle of that, is Khorgos.
Q. What could be the economic reach
of this project?
Part of what Nurly Zhol [Kazakhstan’s
public spending strategy] means is
the development of certain regions of
Kazakhstan that were previously not very
interesting from an economic
point of view. We are creating an
international economy through the Silk
Road. It is about diversification away
from oil and gas. I believe that over the
long term, the Silk Road will prove to be
the savior of the economy. There is no
country in Europe that could place such an
emphasis on its geographical position as
Kazakhstan can.
Q. What kind of response are you
getting so far?
At least twice a week I have foreign
investors or journalists [visiting], now they
have started coming from all over the place.
In May 2016, the entire project
[economic zone] will be completed and
commissioned. And then, investors will
come to start to construct their warehouses
and factories. Contracts and MoUs are
already signed. All the pieces are coming
together now.
At the Dry Port, the trains have started
coming on a daily basis… The fact that we
already have trains coming is showing
people the project is getting real; it is
coming alive.
The trains started coming in July last
year. Since then, the entire logistics world
is waking up and saying, ‘wow, this is really
happening’. So now they are saying, ‘we
have to be part of this. Can we open an
office here? How do we do it?’.
Once completed,
the Khorgos Gateway
Inland Container Dock
will spread over a
240-hectare area
KHORGOSGATEWAY
49. EXTRACTIVESECTORS
Predicted annual oil
production volume by 2021
Extractive sectors still attract the
most foreign direct investment in
Kazakhstan. With 30 billion barrels
of recoverable reserves in giant
fields such as Tengiz, Karachaganak
and Kashagan, and further potential
discoveries in the Caspian Sea,
investment is unlikely to falter.
Notably, British firms have signed
deals to share expertise and
build gas pipelines and steel
superstructures. The refining
sector is also set for growth, as
work continues on a refinery
modernization program and
Kazakhstan partners with China
and Iran to build a fourth oil
refinery. Moreover, low production
costs, improved legislation and
subsoil license auctions present
opportunities for mining companies
looking to build mineral assets.
92m
tonnes
Source: BP Statistical Review of World Energy, 2015
Share of fossil
fuel energy
production,
2014
36% Coal production
53% Oil production
11% Natural gas production
(all values in million tonnes/ oil equivalent)
50. The Sarens Group is the market reference in
moving oversize cargo both vertically and
horizontally all around the world. With a presence
in 60 countries, Sarens counts 4200 strong in its
mission to become the global leader in crane rental
services and heavy lifting & Special Transport
projects.
Sarens has been present and operational in
Kazakhstan for the past 12 years.
Our success lies in the fundamental principles of
good operation, efficiency, tailored approaches
to individual customer needs, and the provision of
simple solutions to complex tasks.
Our cutting edge technical equipment and top
professionals enable us to actively contribute to the
industrial development of Kazakhstan.
With experience in projects such as the Expo which is
planned for 2017, Sarens has become the reference
in Kazakhstan.
WWW.SARENS.COM - INFO@SARENS.KZ - T +7 7122 76 34 25
NOTHING TOO HEAVY, NOTHING TOO HIGH
Компания Саренс является мировым лидером
по перемещению крупногабаритных грузов в
вертикальном и горизонтальном направлении в
любой точке земного шара. Мы имеем филиалы
в 60 странах, численностью 4200 специалистов,
способствующих становлению компании
мировым лидером в сфере предоставления услуг
по аренде кранов, в реализации грузоподъемных
и транспортных проектов.
Саренс присутствует на рынке Казахстана уже
более 12 лет.
Успех нашей компании заключается в
основополагающих принципах грамотного
у п р а в ле н и я , э ф ф е к т и в н о й р а б от ы ,
индивидуального подхода к каждому клиенту и
поиск простых решений сложных задач.
Наше современное техническое оборудование
и профессиональные кадры способны вносить
вклад в индустриальное развитие Казахстана.
Благодаря участию в проектах ЕХРО 2017 Саренс
зарекомендовала себя в Казахстане.
51. 51
EXTRACTIVE SECTORS
INVEST IN KAZAKHSTAN 2016
he oil and gas sector is of enormous
importance to Kazakhstan. Oil
represents about two thirds of
exports on average, along with
30% of gross domestic product and
almost one third of government budget revenues.
In the years up to 2014, the petroleum sector
expanded its share of foreign investment to 35%.
The crude price fall from more than $110/barrel
in mid-2014 to around $25/barrel in January
2016 has had a significant impact on Kazakhstan’s
oil-dominated economy. And while prices are
expected to recover, the longer-term outlook has
softened due to the shorter life cycle of US shale
oil production, which can be quickly switched
back on as prices rise – unlike conventional
projects with their much longer lead times.
The situation has led to a contraction in the
global capital available for oil and gas investment,
and a dampening of the short-to-medium-term
growth prospects of the Kazakh economy.
RECOVERABLE RESERVES
Crude production rose steadily in the decade up to
2014 to stand at around 1.64 million barrels per
day (b/d) before levelling off. Most of the country’s
30 billion barrels of recoverable reserves are
conveniently located in a few giant fields, notably
Tengiz, Karachaganak and Kashagan. Kazakhstan’s
IN THE PIPELINE
The oil and gas sector represents a huge chunk of
Kazakhstans economy, but the country is still
considered to be underexplored
fields are, however, notoriously difficult to
develop, with high temperatures, pressures and
sulphur content. The Tengiz and Karachaganak
fields currently dominate output, while the
giant Kashagan field is expected to start in late
2016 after several years of delays. The country
is considered relatively underexplored with
further potential giant fields to be found,
especially in the Caspian Sea.
MEETING DEMAND FOR GAS
The country’s gas production has risen sharply
over recent years to more than 40 billion cubic
meters (bcm). Associated gas makes up more than
half of the total, which is produced along with
crude from oil and gas fields. The country now
has 14 gas processing plants, with a total capacity
of 19 bcm/year. It is implementing a program
to cut gas reinjection, which is currently used to
boost crude production. It is hoped this, and fresh
production from Kashagan, will provide sufficient
supply to cover an increase in domestic use, and lift
export potential above 30 bcm/year.
Kazakhstan has been steadily increasing the
throughput of its three refineries in recent years,
reducing reliance on petroleum product imports.
In 2014, throughput reached 17.4 million tonnes, up
9% on 2013. Most production goes to domestic use,
with the remainder exported to regional markets.
The country also acts as an important crossroads
for oil and gas exports from other countries. A total
of 65 million tonnes of oil was transported through
the KazTransOil system in 2014.
Chinese investors, led by state oil giants CNPC
and Sinopec, have become increasingly important
in the past few years, alongside more established
western majors including Chevron, Exxon, Total,
and Eni. Shell’s merger with BG consolidates the
two companies’ positions in the country, while
long-term partners from Russia include Lukoil and
Rosneft. State-owned KazMunaiGas Group (KMG)
partners all investors as national operators.
TKAZAKHSTAN OIL
AND GAS STATISTICS
30BN
recoverable barrels of
crude oil reserves
1.5TR
cubic meters of natural
gas reserves
1.64M
barrels per day (b/d)
crude and condensate
production in 2014
42BN
cubic meters per year
gas production
345,100
b/d refinery capacity
(crude distillation)
285,000
b/d petroleum demand
1.355M
b/d liquids exports
CONTRIBUTION TO REAL GDP GROWTH
10+14+10+9+10+10+11+9+3+0+8+8+6+7+4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
6+3+7+2+5+1+2+1+1+2+2+1+0+1+015
10
5
0
Oil and gas sector, % ■ Rest of the economy, % ■
Source: OECD/IMF