By H. E. Shakhrat Nuryshev, KazakhAmbassador to China; Translator by Xu Qinduo
● Deepen Production Capacity Cooperation
● Advantages of Cooperation
● Investment Environment
● Priority Industries
● Policy Support
The initiative of building a Silk RoadEconomic Belt by Chinese President Xi Jinping in September 2013 set off a newjourney in Kazakhstan-China cooperation in the areas of investment, productioncapacity, logistics, transportation and so on. What’s symbolically significantis that the initiative was announced in Astana, the capital city of the firstcountry the Silk Road Economic Belt runs through and the heart of Eurasiacontinent.
Deepen Production Capacity Cooperation
The “Bright Road” economic policy declaredby Kazakh President Nursultan Nazarbayevin November 2014 is well aligned with the design of Silk Road Economic Belt.The two strategic plans both stress the exploration of the transport potentialso as to create advantageous conditions for further cooperation in economic,trade and investment fields, as they’re complementary in an overall and harmonious way. The geographic location,historical exchanges, common interests as well as the private interactionsbetween Kazakh and Chinese leaders determines the long-term nature of the twocountry’s comprehensive strategic partnership.
In order to implement the consensus reachedbetween the two leaders, Chinese Premier Li Keqiang, during his visit toKazakhstan, reached an agreement on production capacity cooperation with hisKazakh counterpart. After the 12th conference and following in-depth studies inthe areas of mining and metallurgy complex, mechanical manufacturing, chemicalindustry, energy, infrastructure, building industry, the two sides worked out alist including 51 items of cooperation, with a total value of 27 billion USdollars.
The 13th conference (video conference) washeld on August 31, 2017, between Chinese and Kazakh on cooperation inproduction capacity and investment. Kazakh Deputy Minister of Investment and Development Yerlan Khairov andChinese Vice Chairman of China’s National Development and Reform Commission,Ning Jizhe were present at the conference. The two sides exchanged ideas on theprospect and the status quo of those cooperation projects.
Advantages of Cooperation
Such a cooperation mechanism provides thepossibility for the two sides to handle the issues popped up in the executionof the cooperation projects in a quick and effective manner.
At the same time, what’s also worthpointing out is, Kazakhstan enjoys a series of advantages of implementing thoseprojects.
Advanced transit logistics and cross-borderinfrastructure. The rail line connecting China and Europe, South Asia, Gulfcountries as well as Russia has been established. The stretch in Kazakhstan ofthe West Europe- Western China international transportation corridor has beencompleted, which is the shortest route from China to Europe.
The overland port of the special economiczone “Khorgos-East Gate” near Kazakhstan-China border area is poised to injectnew vitality into the growing cross-border transportation.
The World Expo featured The Future Energyin Astana ran through a period of three month, from June 10th to September 10,2017. The Expo exhibited the latest technology in the field of renewable andgreen energy. Delegations from 24 Chinese provinces and regions attended theevent, establishing regional cooperation between the Kazakhstan and China. Thepresence of many entrepreneurs reinforced the connection between the economicentities from the two countries in the area of energy and other relatedfields.
A Kazakhstan delegation led by the firstdeputy Prime Minister Askar Mamin went to the China-ASEAN Exhibition in Nanning from September 10 to11th, 2017. Within the framework of the Exhibition, China and Kazakhstan heldthe first regional cooperation forum. The forum promoted the exchanges betweentwo countries, contributing significantly to bilateral cooperation in the areasof economic and trade, investment, production capacity, tourism, culture andpeople exchanges.
What also need to point out is thatprojects in production capacity transfer has already born some fruits. A few projects in the sectors of agriculture,auto making, oil and chemicals, etc. have been well implemented. A deepprocessing factory of oil-bearing crops has been established in NorthKazakhstan State. In the future, an industrial park is to be built on the basisof the factory and a system of finished products production and export-to-Chinalogistics will also be established. That only represents one of the successfulprojects in industrial capacity cooperation.
Given the complex economic situation, thefall of energy prices, as well as the the lack of stability in internationalpolitics, I believe, the sound implementation of the energy cooperationprojects will bring about new vitality into Kazakhstan-China relationship byopening a new journey of cooperation based on mutual benefits.
Investment Environment
Kazakhstan has currently created the bestenvironment in the world to attract foreign investment and carry out investmentprojects. The key factors to draw foreign investment are macro economic, socialand political stability.
Direct foreign investment in Kazakhstansurpassed 247 billion US dollars in the period from 2005 to the first quarterof 2017 and that of 2016 reached 20.6 billion dollars.
Kazakhstan is at 53rd place in the2016-2017 Competitiveness List published by the World Economic Forum. Among the 12 factors on a country’scompetitiveness, Kazakhstan suffers from worsening macro economic environment,the weakness of financial market, the decline of enterprises competitivenessand goods market efficiency. But Kazakhstan goes up on the list thanks to otherfive factors, such as innovation, technical storage, higher education andprofessional training, market scale and system. At the same time, Kazakhstan’sefficiency of the labor market (20th place) remains top of the charts.
Priority Industries
Kazakhstan’s ranking has moved up to 35from 41 among the 190 countries on the Doing Business list, published inOctober 2016, the best performance in years. Compared to the Eurasian EconomicUnion partners, Kazakhstan ranked the first. Belarus stands at 37, Armenia 38,Russia 40 and Kyrgyzstan 75. Besides, the ranking of Kazakhstan surpassescountries like Belgium, Italy, Turkey, Luxembourg, Israel and so on.
The year 2015 marks the beginning of thesecond five-year plan of national industrial innovation and development. According to the plan, six industries areselected for priority development, meaning they are to enjoy the maximumsupport from the state.
1. Metallurgy;
2. Chemical;
3. Petrol processing and Petrochemical;
4. machine building;
5. Building material manufacturing;
6. Food industry;
Policy Support
In order to provides support to foreigninvestors, Kazakhstan passed laws on strengthening investment environment onJune 12, 2014. It stipulates such measures as the following:
1) Investors in priority industries will beimmune from taxes for 10 years on business income tax and land tax, 8 yearsfrom property tax.
2) The state will compensate 30% capitalexpenditure after the projects are put into operation (investment compensation);
3) During the investment projects’execution and, in the first year after the projects being operational, there’llbe no quota limit in the employment of foreign workers. No permit is requiredin any way.
4) When it comes to amendment of lawsrelated to raising tax rate (except for value added tax and consumption tax)and employment, stability of investors’ tax rate will be ensured.
5) When it comes to dealing with governmentagencies, One Stop services will be provided for foreign investors.
6) Currently, the Investment and Development Ministry of Kazakhstan hasestablished One Stop services for those investors in priority projects. Such apractice help cut investors’ efforts to gather and prepare the materials andavoid the direct contact with government agencies.
7) Investors can approach the call center,where workers will offer advice on topics of interests to the investors.
8) For the purpose of protecting the rightsand benefits of foreign investors, Kazakhstan introduced Investor Coordinatormechanism through legislation. The Minister of Investment and Development actsas the coordinator, under which there’s a team composed of representatives fromgovernment agencies. The team will be responsible for any questions risingbefore and outside of the litigation processes.
In addition, Kazakhstan also established aForeign Investors Council under the direct leadership of the President as wellas Investment Environment Improvement Council under the leadership of thegovernment.
Foreign Investors Council led by thePresident is tasked with providing ideas and suggestions to the decisions onkey investment policy and economic development.
The goal of Investment EnvironmentImprovement Council led by the Prime Minister is to draw and make good use ofthe state and foreign investment as well as assist investors to overcome thedifficulties they undergo in their work.
Besides, a special investment company -Kazakhinvest – was established on the basis of national export and investmentinstitutes. Kazakhinvest is authorized to implement those supporting measuresto those innovative efforts to draw investment as well as develop and promoteexport businesses. The company provides services to investment projects duringthe whole process from concept to its execution as well as One Stop windowmodel. It also works the coordination center for the special economic zones inKazakhstan. When discussing the prospects of investment projects andconditions, Kazakhinvest will act on behalf of the government to provide avariety of public services including those investment benefits to investors aswell as all types of permits in carrying the projects and, as next step,business management.
There’s a need to emphasize the advantagesof Eurasian Economic Union, which groups Armenia, Belarus, Kazakhstan,Kyrgyzstan and Russia.
EEU came into effect on January 1st, 2015,with a goal to establish a unified market by removing barriers in the movementof goods, services, investment and labor and work out a unified economicpolicy, so as to create effective conditions for doing business.
EEU aims to become one of the largestregional integrations in the world. It boasts a population of 182 million, aGDP of 2.2 trillions US dollars, an industrial value of 1.3 trillion, foreigntrade volume at 877.6 billion dollars, standing for 3.7% of world’s totalexport and 2.3% of world’s total import.
By creating a unique environment forinvestors with lowest tax rate and a stable relationship with the Kazakhstangovernment, Kazakhstan has become thebest door to enter the huge market of Eurasian Economic Union.
Based on the distance between China and EEUand Central Asia, Kazakhstan is becoming an increasing advantageous businesspartner.