ON THE MAP

Kazakhstan 2011 | ECONOMY | INTERVIEW

TBY Kazakhstan has been one of the most successful CIS countries with regards to its integration into the world economy. What has Kazakhstan done differently from other countries in the region?

Asylkhan Serikov
BIOGRAPHY
Asylkhan Serikov started his career in 1994 as a researcher for the Institute of Sociology of the National Academy of Sciences and the Kazakhstan Institute for Strategic Studies under the President of Kazakhstan. From 1997 to 2001 he served in Kazakhstan’s Diplomatic Service before working in a series of management roles for international oil and gas, and service companies until 2008. Before taking on his current position as Chairman of the Committee on Investments in 2010, he was a Consultant to the Center for Strategic Research and Analysis of the Administration of the President of Kazakhstan and Director of the Strategic Investments Department of Samruk-Kazyna SWF.

Kazakhstan has been one of the most successful CIS countries with regards to its integration into the world economy. What has Kazakhstan done differently from other countries in the region?

Our policy of openness and stability has become one of the key factors in attracting foreign companies to Kazakhstan. Since 1993, Kazakhstan has attracted more than $125 billion. This puts Kazakhstan in first place among Central Asian countries and second among CIS countries. Our country has also taken a leading position in terms of accumulated foreign investments per capita as a result of our smart investment policy. Since gaining independence we have managed to create a sufficiently attractive investment climate. Kazakhstan has about 8,000 companies with foreign capital, including companies on the Fortune 500 list. This is a great achievement for Kazakhstan. However, it should be noted that about 74% of all FDI to Kazakhstan in 2000 to 2009 was provided by investors focused on the raw materials sector. The country has set an ambitious goal for accelerated economic diversification. The state launched a program for accelerated industrial and innovative development in 2010. It has become clear that FDI will be the main way to implement the program, which aims to diversify and strengthen the national economy. In line with this program we have developed a specialized branch program based on the attraction of investments, development of special economic zones (SEZs), and export promotion for the next five years. The first year after the state program was launched has shown that the approach of the chosen strategy was correct. This was evident from the positive trend of attracting $2.1 billion in investment into manufacturing—almost 17% higher than over 2009. Particular importance is being paid to the implementation of niche projects that involve modes of production not yet established in Kazakhstan. So far more than 80 niche projects involving the production of more than 400 kinds of products worth over $40 billion have been identified. The major component of the state program is the Industrialization Map of Kazakhstan that includes all the significant projects in the national economy. The map is a kind of information base for foreign and domestic companies, providing information on investment projects and business opportunities. The industrialization map includes 469 projects worth $56.4 billion (KZT8.3 trillion) that aim to create more than 141,000 jobs during construction and 167,000 jobs during operation.

The Committee on Investments (CI) provides assistance in promoting the development of a favorable investment climate in the country. What strengths and prospects has the CI brought to the investment climate of Kazakhstan?

The CI aims to create an attractive environment for direct investment into secondary sectors of the economy. The Committee has been doing a lot of work on this. In 2010, the Committee was involved in 28 events to promote Kazakhstan abroad, resulting in more than 150 bilateral cooperation agreements—most successfully with France, Germany, Belgium, Turkey, and South Korea. In 2011, the CI, together with relevant government agencies, has organized the seventh World Islamic Economic Forum (WIEF)—the first CIS country to do so—and it received a lot of attention from the Islamic financial world. The forum invited more than 20 delegations from Organization of the Islamic Conference (OIC) member states, with delegates from more than 40 different countries and international organizations also being represented. The outcome of all these conferences was not superficial. The agreements that were reached between Kazakhstani and foreign companies should lead to the realization of investment projects. Another important direction of the CI's work is in monitoring the implementation of investment contracts. Preferences are needed to promote investment inflows and develop priority sectors in Kazakhstan's economy. The Committee also actively cooperates with the OECD, under the “Sector Competitiveness Strategies" project. This project was initiated by the government of the Republic of Kazakhstan and the OECD. The project aims to formulate recommendations in the IT sector, in agriculture, and in the investment policy and investment promotion area.

How do you facilitate business for foreign investors and their local partners? What modes of cooperation do you offer?

The President created an advisory body called the Foreign Investors Council 12 years ago. At plenary sessions of the Council critical national and global economic issues are discussed and their influence on the development of Kazakhstan is assessed. These working groups discuss Kazakhstan's image, taxation levels, legislation issues, foreign investor activity, and oil and gas development. These working groups are good platforms for investors to make recommendations and consult on various areas of activity. The Council consists of 29 world giants such as the European Bank for Reconstruction and Development (EBRD), Deutsche Bank, Royal Bank of Scotland, Mitsubishi International, BG Group, Chevron, Arcelor Mittal, Telia Sonera, General Electric, Metro, Finmeccanica Group, Cameco Corporation, the Asian Development Bank, Deloitte, and Ernst & Young.

“The Committee on Investments aims to create an attractive environment for direct investment into secondary sectors."

The accelerated industrial-innovative development plan is a big step in achieving economic diversification. In which export-oriented non-prime sectors do you see the biggest appetite for foreign investors?

The program seeks to encourage growth in the secondary sector—specifically in oil refining and developing oil and gas infrastructure, a metallurgical complex, a nuclear and chemical industry, a mechanical engineering and construction industry, pharmaceuticals, agriculture, tourism, ICT, biotechnology, alternative power, and space activities. Metallurgy is one of the prime sectors because we have large supplies. Kazakhstan intends to increase this type of processing to make products with a higher value-added. It is also necessary to mention the chemical industry. The market capacity of the industry is about $3.5 billion. Imports make up about $2.2 billion, basically as it encompasses high-cost goods such as rubber and plastic, perfumes, and detergents. The market capacity of mechanical engineering in 2008 was around $13.2 billion, and the import of capital goods represented 85% of overall imports. Within the mechanical engineering sector, priority is given to agricultural machinery manufacture (such as tractors and combines), rail passenger and freight wagons, and also to the motor industry (automobile and commercial cars). Taking into account the fast rates of construction in Kazakhstan, great attention is given to the construction industry. Kazakhstan is also interested in developing its own pharmaceutical industry. Under the state program for industrial-innovative development, the share of domestic medical products by the end of 2014 should increase by up to 50% of the internal market. Today, Kazakhstani manufacturing enterprises can contractually manufacture 400 medical products.