Export and import challenges in countries with economies in transition - Kazakhstan

Presentation by

Ambassador Stephan Nellen,

Geneva, June 18, 2012

Introduction

• Main question of the 5th Session of the Committee on Trade:

How to increase the participation of transition economies in international trade?

• My example: Kazakhstan

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Example: Kazakhstan • Economy based on natural

resource exploitation

•Oil/gas•Metals•Grain

• 2011 trade figures

• Imports 37,9 billion USD

•Exports 88,3 billion USD

•Surplus 50,4 billion USD

What is so special with Kazakhstan?

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Exports of Kazakhstan – sector distribution

• More than 90% of all Kazakh exports go into oil&gas, mining (metals) and agricultural (export of grain) sectors

• Less than 10% of exports cover other items (mainly of the processing industry)

• To promote non-oil/metal/grain exports, need to develop industrial sectors of the economy

• To promote non-oil/metal/grain sectors of economy need further investments into this sectors of economy

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Foreign Direct Investments – Sector distribution

• Foreign Direct Investments (FDI) concentrated mainly in oil/metal sectors (nearly 80%)

• Investments in other sectors (mainly distribution – wholesale/retail, banking and finance, and construction) are not linked to exports, and is 20% only

• Conclusion:

• Need to increase strongly investments in industrial and service sectors which can produce exportable products

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Response of the Kazakh Government

• Objectives:

increase investments in non-oil/metal/grain sectors

Create economic tissue of a normal economy, including SMEs, create more traditional working places

Create better conditions for export related industries in the non-oil/metal sectors

• Approach:

• Reduce imports by promoting local products („local content“ requirement)

• Encourage joint ventures and investments in these sectors

• Increase market base through Custom Union

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Investment promotion: assessment

• Good policies and state programs:

• Investment preferences (e.g. exemption from custom duties, tax brakes)

• Special economic zones• Support for SMEs (Road map for

Business 2020)• Institutional and financial support• Service support• Foreign Investor‘s Council under the

President

• But: important impediments and obstacles remain

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Impediments to foreign investments in Kazakhstan

• Legal environment inconsistent and partly outdated, little guidance from authorities (unfinished reform agenda)

• No independent judiciary

• Criminalization of civil disputes (taxes, custom, etc.)

• Difficulties with work permits

• Increased demands for „local content“

• Antiquated, ex-soviet standards

• Heavy bureaucracy and high level of corruption

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Response of the Government of Kazakhstan

Establishment of a “Council under the Prime Minister to Improve the Investment Climate”

• Members are high officials of the Government (Deputy Prime Ministers, Ministers, high officials), large foreign company representatives of companies present in the country, and a number of foreign Ambassadors

• Objectives:

•1) tackle practical problems in dialogue, find pragmatic solutions•2) promote longterm structural reforms with the aim to come close to relevant OECD standards

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Future tasks of Government to promote growth of investments and trade I

• Encouragement of local production together with foreign actors

• Increase of local managerial capacity in harmony with needs of foreigns investors

• Increase educational level of population

• English as a third language• Bolashak scholarship program

• Better implementation of strategies and programs to enhance local non oil/metal industries

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Future tasks of Government to promote growth of investments and trade II

• Continue to promote service industry: Almaty as a regional financial center, tourism

• Participation in regional integration mechanism, e.g. “Customs Union” with Russia and Belarus, or “Eurasian Economic Space EES”, to broaden market base

• Accession to WTO

• Promotion of Free Trade Agreements (e.g. present negotiations with EFTA)

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Thank you for your attention