Kazakhstan: An attractive investment

destination

JSC “NATIONAL EXPORT & INVESTMENT AGENCY “KAZNEXINVEST”

Ministry of Industry and New Technologies of the Republic of Kazakhstan

Date: 13 JULY 2012

Place: Auckland, NZ

KAZAKHSTAN: YOUR GATEWAY TO 3/4 BRICS OR TO 3 BILLION PEOPLE

KAZAKHSTAN

4

7

5 5.

4 5.

4 5.

4

The average minimum duration of flights to major centers of economic activity (in hours)

KAZAKHSTAN 101

Territory:Size of Western Europe (2.7 mln. sq. km.)

Population: 16,5 mln

GDP, 2011: $ 168 bill

GDP per capita, 2011: $ 11,070

Major languages •Kazakh (state language) • Russian (official, business language) • English, Chinese (young generation)

Main ethnic groups: •Kazakhs: 65% • Russian: 25% • Other: 10%

INDUSTRY OF KAZAKHSTAN MANY FOREIGN COMPANIESHAVE ALREADY INVESTED IN KAZAKHSTAN

FDI FLOWS INTO KAZAKHSTAN HAVE DEFIED GLOBAL ECONOMIC CRISIS

Source: National Bank of the RK

FDI inflows into Kazakhstan, million USD

2,781

4,557 4,106 4,624

8,317 6,619

10,624

18,453

19,760 19,138

18,076

19 850

0

5,000

10,000

15,000

20,000

25,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2 Q2011 2011

Mining 29%

Manufacturing 10%

Exploration

43%

Other 18%

FDI Structure, 2000 – 2011

KAZAKHSTAN HAS ATTRACTED GREATEST FDI PER CAPITA IN CIS

Accumulated FDI in the CIS,

2000-20 yy., bln. USD10

Accumulated FDI in the CIS countries per capita,

2000-20 yy., USD/person10

Russia

Kazakhstan

Ukraine

Belarus

Azerbaijan

Turkmenistan

Moldova

Uzbekistan

Armenia

Kyrgyzstan

Tajikistan

Kazakhstan

Belarus

Moldova

Kyrgyzstan

Tajikistan

Uzbekistan

Turkmenistan

Russia

Armenia

Ukraine

Azerbaijan

2 %

2 %

%

%

9%

2 %

%

%

%

%

%

6

1

28

20

2

18

21

18

8

19

423,2 5076

81,4 2960

58 1624

9,9 1360

9,6 1276

8,2 1044

4,5 1036

4,2 794

2,8 183

0,9 162

1 133

Source: UN World Investment Database

CAGR

*Compound annual growth rate

*

INDUSTRY OF KAZAKHSTAN WHY IS KAZAKHSTAN ATTRACTIVE FOR FOREIGN INVESTORS?

Political stability and good investment climate

1 ▪ Higher level of trust in political

institutions and efficient allocation of public funds (WEF 2011) than in the CIS region

▪ Easy to do business (ranked 47th on WB Doing Business indicators 2012; top 10 reformer in last 2 years)

2 Regionally attractive fiscal and non-fiscal regime and protection of foreign investment

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

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

▪ 46 bilateral agreements on mutual protection of investments (US also)

▪ Main international arbitration instruments ratified

Stable macroeconomic indicators and high growth 3 ▪ GDP growth: 7.5% (IMF 2011) ▪ One of the lowest debt/GDP ratios in

the world: 8.5% (WEF 2011) ▪ Budget deficit: -2.0% (WEF 2011) ▪ Inflation rate: 7.4% (2011 NBK) ▪ Upgrade from stable to positive

offered by major ratings agencies

4 Springboard to circa 3 billion potential customers

▪ 3 out of 4 BRICs are within 4 hours plane ride

▪ Customs Union with Russia and Belarus, with 170 million people and total GDP of USD 2 trillion

▪ Open Economy (trade 70% of GDP) ▪ Numerous trade agreements signed

HIGH CONFIDENCE IN POLITICAL INSTITUTIONS AND EFFECTIVE MANAGEMENT OF PUBLIC FUNDS

The index of trust political institutions Efficiency of the allocation of public fundsPlace in the ranking

Place in the ranking

Extremely low IrrationalVery high Highly

UAE

Saudi Arabia

Australia

Chile

Jordan

Azerbaijan

Kazakhstan

Macedonia

Russia

Georgia

Turkey

Poland

India

Croatia

Bulgaria

Lithuania

Romania

Czech

Ukraine

1 1

Saudi Arabia

UAE

Australia

Chile

Jordan

Georgia

Kazakhstan

India

Azerbaijan

Poland

Russia

Macedonia

Bulgaria

Czech

Turkey

Romania

Lithuania

Croatia

Ukraine

7

9

17

34

43

45

47

68

69

78

81

82

88

96

104

108

116

121

122

139

6

7

21

26

42

52

55

57

59

76

82

86

90

95

96

110

117

121

131

139

5,6 5,2

5,4 5,2

4,6 4,4

3,8 4,2

3,5 3,7

3,5 3,4

3,4 3,4

2,9 3,4

2,9 3,4

2,6 3,1

2,5 3,1

2,5 3,0

2,3 3,0

2,2 2,9

2,1 2,9

2,0 2,5

2,0 2,4

1,9 2,4

1,9 2,1

Source 1: Global Competitiveness Report 2010-201

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

Source: World BankDoing Business 2012

166

152

132

120

96

80

72

71

69

66

64

62

59

47

39

33

27

22

16

15

Uzbekistan

Ukraine

India

Russia

Jordan

Croatia

Romania

Turkey

Belarus

Azerbaijan

Czech Republic

Poland

Bulgaria

Kazakhstan

Chile

United Arab Emirates

Lithuania

Macedonia

Georgia

Australia

Doing Business 2012 Country rank

BUDGET BALANCE AND THE SHARE OF PUBLIC DEBT TO GDP

Budget balance, 2009,% of GDP Share of public debt to GDPy

, 2009 ., %

Place in theranking

Place in theranking

Low LowHigh High

137

Azerbaijan

UAE

Kazakhstan

Macedonia

Saudi Arabia

Croatia

Bulgaria

Australia

Chile

India

Turkey

Czech

Russia

Poland

Romania

Lithuania

Georgia

Ukraine

Jordan

Kazakhstan

Russia

Azerbaijan

Bulgaria

Australia

Macedonia

Chile

Saudi Arabia

Romania

Lithuania

Ukraine

Croatia

Czech

Turkey

Poland

UAE

Jordan

India

4

11

33

45

53

57

64

67

76

81

96

102

106

113

119

124

127

134

136

139

7

8

9

13

23

27

29

37

38

46

52

61

75

81

89

101

115

116

9,48,5

0,48,5

-2,09,9

-2,914,8

-3,219,2

-3,321,3

-3,922,1

-4,022,9

-4,423,7

-4,629,3

-5,531,3

-5,935,9

-6,242,1

-7,145,2

-8,351,0

-8,956,3

-9,464,4

-11,473,1

-11,8

Source: Global Competitiveness Report 2010-2011

CRITERIA for strategic investment projects: Investment in strategic sectors High added valueactivities Investment in excess of $50 million or in high-tech products

Special incentives for strategic investment projects

Land&property tax – 0% for 7 years

Industrial subsidies for socially- deprived areas

Exemption from customs duties

In-kind state grants 10-year tax-loss carry-forward

INVESTMENT INCENTIVES

ATTRACTIVE INVESTMENT INCENTIVES FOR MANY SECTORS

First-comer Guaranteed Government Purchase

SECTOR-SPECIFIC INCENTIVES IN 9 DEDICATED SEZS ACROSS COUNTRY

SEZ “IT Park” (IT-industry)

SEZ “Ontystik” (textile industry)

SEZ “Khorgos Eastern Gate”

(Trade, logistics)

SEZ “Saryarka” (metallurgy)

SEZ “Astana new city” (construction industry)

SEZ “Burabai” (Tourism)

SEZ “Pavlodar” (chemical industry)

SEZ “Petrochemical park” (Oil and gas industry, petrochemical machinery)

SEZ “Marine Port Aktau”

(logistics, transport)

Aktau

Atyrau

Shymkent

Astana

Karaganda

Almaty

Pavlodar

FISCAL INCENTIVES

• 0% Corporate Income Tax until 2020-2025 with possibility for extension

• 0% for land and property tax until 2020-2025 with possibility for extension

• VAT– 0% (for products consumed in SEZ) until 2020-2025 with possibility for extension

• Increase of marginal rate of depreciation for tax on the production of software to 40%

• For SEZ “IT Park” – social tax is 0% for 5 years, under certain conditions

• For SEZ“IT Park”– depreciation rate for software increased to 40 %

NON-FISCAL INCENTIVES

• Provision of free land in SEZ for a period of up to 10 years from registration time as SEZ resident

ATTRACTIVE INVESTMENT INCENTIVES IN SEZS

KAZNEX INVEST:YOUR ONE-STOP-SHOP FOR INVESTING

Providing information about

business / invest

projects and analytical information

Assist in the selection of

projects of AIIDHelp in choosing a partner

Assistance in administrative

mattersOrganization of meetings

with officials

COMPREHENSIVE ASSISTANCE

TO FOREIGN INVESTORS

Assistance in obtaining

state support for investors

STRATEGIC SECTORS FOR FDI ATTRACTION

STRATEGIC SECTORS

Modernization of existing

enterprises

· Metallurgy and productionof metal products

· Oil refining and Infrastructure of Oil and gas sector

· Chemical and pharmaceutical industries

· Аgro-industrial sector · Defense industry

· Construction industry and Production of building materials

· Transport and Info communications

· Machine construction

· Uranium industry

· Light industry

· Tourism

· Space industry

Creation of new efficient

enterprises

Selective support of enterprises of future

economy

NEW APPROACHES (2010 - 2014)

1. High productivity level

. 1. High productivity level 2. High added cost 3. Export oriented 4. Competitiveness on domestic market

1. Innovativeness 2. Improving of telecommunications infrastructure

3. Influence on production increasing in traditional sectors

CRITERIA

2. Creation andimproving of

infrastructure power industry, pipelines, roads

AGRICULTURE OF KAZAKHSTAN

Facts

5.7, 10%

18.1, 30%

32.9, 55%

1.6, 3% 1.2, 2% 0.17, 0%

cattle sheep and goats poultry horses pigs camels

Total yield of main crops in 2011 – 34,6 mln tn Number of livestock in 2011 - 59,7 mln heads 2.2 mil. people engaged in agriculture 21 mln ha – arable land

67% for wheat

$20,5bn - gross output of agriculture industry (2011) $15,5bn agricultural products $5.9bn processing of agricultural

products 2007-2011 export of wheat -$7bn

Number of livestock in 2011 in mln heads

Productivity indicators for livestock The average live weight of one head of cattle 300

Milk yield per cow in tonns per year 2,2 Egg production of laying hens per year 198

Annual wool clip per sheep in kg 2,8

22,732 , 66%

3,076 , 9%

2,593 , 7%

2,878 , 8%

3,303 , 10%

wheat potatoes barley vegetables other types

Productivity indicators for main crops (hwt/ha) Wheat 16

Potatoes 167 Barley 17

Vegetables 221

Yield of main crops in 2011 in tones

ROLE OF THE REGIONS IN AGRICULTURE OF KAZAKHSTAN

AKTOBE

MANGYSTAU

NORTH-KAZAKHSTAN

WEST-KAZAKHSTAN

ATYRAU

QYZYLORDA

SOUTH-KAZAKHSTAN

PAVLODAR

AKMOLA

KARAGANDA

KOSTANAY

ALMATY

EAST-KAZAKHSTAN

13-15%

9 - 11%

5 - 7%

0 - 5%

AKTOBE

MANGYSTAU

NORTH-KAZAKHSTAN

WEST-KAZAKHSTAN

ATYRAU

QYZYLORDA

PAVLODAR

AKMOLA

KARAGANDA

KOSTANAY

ALMATY

EAST-KAZAKHSTAN

more plant growing

more livestock farming

near equal

SOUTH-KAZAKHSTAN

cattle sheep and goat pigs horse poultry

Livestock farming

wheat, rye, barley, rice potato, vegetable, fruits sunflower, rapeseed, cotton fodder sugar beet

Plant growing

Share of the regions in agri. output Specialization of the regions

CLIMATE IN THE REPUBLIC OF KAZAKHSTAN

Harsh continental climate with uneven rainfalls

6 zones: forest-steppe, steppe, semidesert, desert, foothills and mountain area

Vegetative period lasts from 105 to 165 days and is longer in the southern regions.

General info

Temperature: 8.9⁰C Temperature range: 30.5⁰C. Highest monthly high T: 30⁰C in Jul. Lowest monthly low T:-12⁰C in Jan. 581 mm of rainfall per year, or 48 mm per month. 2392 hours of sunlight per year and 6.6 hours of

sunlight per day annual relative humidity is 59.9%

Averages

Average annual precipitation, mm

REQUIREMENTS FOR THE ENTRANCE IN THE HALAL INDUSTRY OF RK

Association “Halal Industry of Kazakhstan” (AHIK)

1. Revelations of God in the Holy Quran 2. Sunnah of the last messenger of God - prophet Muhammad (peace be upon him and Allah) 3. Sharia, expressed in Ijtihad fuqaha(conclusion scientists) who followed the precepts of the Koran 4. Decisions and recommendations of the Department of Fiqh Spiritual Board of Muslims of

Kazakhstan 5. The current legislation of the Republic of Kazakhstan

Production of halal food in RK is certifiable

Standarts are based on 5 pillars

Authority for certification

AHIK State Standards Regulation | State Standard ST RK1353-2005 | State Standard ST RK1632-2007

• AHIK State standards are based on Malaysian Standards that were approved by all 58 States members of the OIC.

• This Malaysian Standard(MS) was developed by the Technical Committee on Halal Food

INDUSTRY OF KAZAKHSTAN FOREIGN COMPANIES IN THE HALAL INDUSTRY OF RK

Company Country Operations

Almi Production of the spice and flavour mixtures plus additives for sausage, ham, meat and fish production

Danisco Production and development of the food ingredients, sweeteners and sugar

Danone Production of fresh dairy products, waters, baby nutrition, medical nutrition

Wrigley’s Production of gums, mints, hard and chewy candies, and lollipops

Safi Production of Halal skincare, personal care and toiletry products

Halagel Production of ‘Halal’ food, pharmaceutical grade gelatine and empty hard gelatine capsules

Ulker Production of cookies, crackers, and chocolates

Shurah Production skincare, haircare, bodycare, perfume range and cosmetic products

There are 40 foreign companies in the Halal industry of RK

THANK YOU FOR YOUR ATTENTION!

www.invest.gov.kz

Supporting exhibits

GDP PER CAPITA OF COUNTRIES-COMPETITORS OF KAZAKHSTAN FOR FDI

The growth rate of GDP per capita in the years 2000-2009

GD

P p

er

capita in

2009

(mln

. U

SD

/pers

on p

er

PP

P)

KazakhstanBelarus

AzerbaijanTurkmenistan

Uzbekistan

Georgia

Ukraine

India

BulgariaJordan

Rumania

Macedonia

Turkey

LithuaniaRussiaCroatia

Poland

Saudi Arabia

Czech Republic

AustraliaUAE

Азербайджан

Туркменистан

Беларусь Казахстан

Грузия Индия Узбекистан

Россия

Болгария

Литва

Украина

Румыния

Польша

Иордан

Чехия

Турция

Кроатия Чили

Македония

Австралия

Саудовская Аравия

ОАЭ

-

10

20

30

40

50

60

0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

GD

P p

er

cap

ita

20

10

(P

PP

)

Growth rate of GDP per capita 2000-2010

Azerbaijan

Turkmenistan

Belarus Kazakhstan

Georgia India

Uzbekistan

Russia

Bulgaria

Lithuania

Ukraine

Romania

Poland

Jordan

Czech Republic

Turkey

Croatia

Chile

Macedonia

Australia

Saudi Arabia

UAE

-

10

20

30

40

50

60

0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

GD

P p

er

cap

ita

20

10

in t

ho

usa

nd

s U

SD (

PP

P)

Growth rate of GDP per capita 2000-2010

0% 2% 4% 6% 8% 10% 12% 14% 16% 20%

Source: IMF

INDUSTRY OF KAZAKHSTAN

Source: Agency of the RK on Statistics

The structure of industrial output in % Growth in industrial production in%

Mining Manufacturing Electricity, gas and water supply

THE VOLUME AND STRUCTURE OF FDI IN KAZAKHSTAN BY INDUSTRY FOR 2000 - 2010 YEARS

9%

22%

52% 57%

49% 52%

73% 47%

23%

22%

22% 17%

9%

22% 6%

9%

11% 15%

2% 4%

7%

6%

6% 6%

6% 5%

8% 2%

9% 5%

1% 1% 4% 3% 3% 4%

2000 2003 2006 2009 2010 9м. 2011

Финансовая деятельность

Прочее

Торговля

Обрабатывающая промышленность

Добыча нефти и газа

Геологоразведка

Others

Trade

Manufacturing

Oil & Gas

Exploration, oil & gas mining

Financial activities

Exploration

2011 2010 2009 2006 2003 2000

TRANSPORT INFRASTRUCTURE

Source: Global Competitiveness Report 2009-2010

In the ratings, 1 point corresponds to a score of poor infrastructure, and 7 points correspond to infrastructure that meets world standards of efficiency and outreach

Index of roads developmentIndex of air transport

development

Index of Railway

developmentPlace in the

rankingPlace in the

rankingPlace in the

ranking

UAE

Chile

Lithuania

Croatia

Australia

Jordan

Turkey

Azerbaijan

Georgia

Czech

Macedonia

India

Kazakhstan

Russia

Bulgaria

Ukraine

Poland

Romania

UAE

Chile

Czech

Australia

Jordan

Azerbaijan

Turkey

India

Georgia

Croatia

Lithuania

Romania

Russia

Kazakhstan

Bulgaria

Poland

Ukraine

Macedonia

India

Czech

Lithuania

Austria

Ukraine

Azerbaijan

Kazakhstan

Russia

Georgia

Croatia

Bulgaria

Poland

Romania

Turkey

Macedonia

Chile

Jordan

7

15

26

34

37

38

42

48

58

66

79

87

89

116

118

124

125

127

129

133

3

19

24

28

33

50

51

54

65

77

79

83

90

92

94

96

97

101

123

133

20

24

26

29

30

31

32

33

41

43

53

54

56

61

63

71

76

84

133

6,2 6,7 4,5

4,3

4,2

4,1

4,1

4,0

3,9

3,9

3,5

3,4

3,0

2,9

2,9

2,7

2,5

2,2

2,1

1,9

5,8 6,0

5,3 5,9

5,1 5,8

5,0 5,6

5,2

5,1

5,1

4,7

4,4

4,3

4,2

4,0

4,0

3,9

3,7

3,7

3,6

3,0

5,0

4,9

4,3

3,9

3,6

3,3

3,2

3,1

2,5

2,4

2,2

2,2

2,1

2,0

SaudiArabia

SaudiArabia

SaudiArabia

71 1 17 7

COMPARISON OF THE SEVERITY OF THE TAX BURDEN ON THE DOING BUSINESS RATING

Taxes/country UAE

Lithuania

Kazakhstan Azerbaijan Russia Czech Ukraine Belarus

Tax on profits 14% 30%

20 %

22% 20% 19% 25% 24%

VAT 0% 18% 12% 18% 18% 20% 20% 20%

Income tax 0% 15% 10% 30% 13% 15% 30% 12%

UST 13% 31% 20% 22% 34% 35% 38% 35%

Property tax 0% 1% 1% 1% 2% 0,3

$/sq.m 1%

Land tax 0% 1.5% 20$/ha 1200 $/ha

1.5% 50

$/ha 1 354 $/sqm

1%

Other

The tax rate varies

between Emirates

Transport tax Road tax,

Energy tax Transport tax

7 62 13 81 105 119 181 156

15%

THE LEGAL FRAMEWORK IN KAZAKHSTAN

Current legislation

THE LAW OF THE RK AS OF JULY 21, 2011 № 469 "ON SPECIAL ECONOMIC ZONES IN THE REPUBLIC OF KAZAKHSTAN"

THE LAW OF THE RK AS OF JANUARY 8, 2003 № 373 "ON INVESTMENTS"

46 BILATERAL AGREEMENTS ON MUTUAL PROTECTION OF INVESTMENTS

CREATION OF CUSTOM UNION: RUSSIA, BELORUSSIA AND KAZAKHSTAN

THE LAW OF RK ON STATE SUPPORT OF INDUSTRIAL INNOVATIVE ACTIVITIES

BILATERAL INVESTMENT PROTECTION AGREEMENTS

Austria Georgia South Korea Tajikistan

Azerbaijan Egypt Latvia Turkey

Armenia Israel Lithuania Russia

Belgium-

Luxembourg Union

India Malaysia Uzbekistan

Jordan Mongolia Ukraine

Iran Netherlands Finland

Bulgaria Spain Pakistan France

Great Britain Italy Poland Croatia

Hungary Qatar Romania Czech

Vietnam China Serbia Switzerland

Germany Kuwait Slovakia Sweden

Greece Kyrgyzstan USA Estonia

Countries with which Kazakhstan has signed bilateral agreements on mutual investment protection

GOVERNMENTAL PROGRAM OF FORCED INNOVATIVE INDUSTRIAL DEVELOPMENT

INDICATORS

-GDP grown up to 50% than in 2008

-Increasing of labor productivity in manufacturing industry up to 50% and in some sectors up to 100%

-Increasing the share of non resource export up to 40%

-Decreasing energy intensity of GDP no less than 10%

-Increasing the share of innovative enterprises up to10% of active enterprises

GOAL: Ensure sustainable and balanced economic growth through diversification and competitive recovery.

THE INSTITUTIONAL FRAMEWORK OF KAZAKHSTAN

The Committee on Investment of

the Ministry of Industry and

New Technologies of the RK

The Foreign Investors’ Council

chaired by the President of the

Republic of Kazakhstan

National

Innovation

Fund

Kazakhstan

Institute for

Development of

Industry

Entrepreneurship

Development Fund

Kazakhstan

Development

Bank

KazExportGarant

National Agency on

Export & Investments

AZNEX NVEST

«K I »

FDI: the system of attraction

State

Insurance Company

Kazyna

Capital

Management

I. EXPORT PROMOTION

1. Service support of exporters

2. Financial support of exporters

(export grants)

II. INVESTMENT ATTRACTION

1. Matchmaking of investors and investment

projects initiators in Kazakhstan

2. Service support of investors

“KAZNEX INVEST”: YOUR PARTNER IN THE INVESTMENT PROCESS

33

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