THE ADVOCATE

Kazakhstan 2015 | ECONOMY | INTERVIEW

TBY talks to Erlan Sagadiev, Vice Minister of Investment and Development, on reforms in the industrial sector and current investment policy in the country.

Erlan Sagadiev
BIOGRAPHY
Erlan Sagadiev earned his MA in Economics at the University of Minnesota. He started his career in 1990 as a secretary for the department of external foreign economic relations of the applied economy office at the Ministry of Foreign Affairs. Since then he has held positions such as Project Manager for technologies marketing at Developed Technology Resource (Minneapolis, USA), President of the International Business University (Almaty, Kazakhstan), head of the board of Frontier Mining (London, UK), and President of the International University for Information Technologies (Almaty, Kazakhstan). Since February 2014, he has also served as Vice-Minister of Industry and New Technologies of Kazakhstan.

What are the main outcomes of the first five-year industrialization plan, and were there any changes in the quality of Kazakhstan's industrial sector?

Diversification of economy is a long-term process. We have just completed the first step. The aim of the first five-year plan was to reform the economic policy of the country, to stimulate the development of the manufacturing industry and generate innovation. We concentrated on preparing the basic conditions for the development of the manufacturing industry, and attracting new investments and new technologies. The government had to review its entire legal base—changing and adopting 50 laws—and we developed new instruments to support and improve the business and investment climate. We also developed master plans in priority departments and gained a clear vision of what we are producing and what markets we are aiming for. Key projects were discussed, partners were found, and financing was secured. Secondly, we had to take down the infrastructural barriers, such as roads and electricity supply. All this required a massive effort and a lot of time.

What factors are responsible for these results and improvement of investment climate?

Kazakhstan has achieved real results in improving the investment climate. To implement the projects suggested by the President of the Republic of Kazakhstan, the government created several new incentives for investors and improved the investment climate. These propositions formed the base for the Complex Plan of the government of Kazakhstan to attract direct foreign and domestic investments. Within the framework of this plan, the government approved a law about implementation of new incentives for potential investors. The law provides additional means of government support for investors, such as exemption from corporate income tax and land tax for 10 years and from property tax for eight years, compensation up to 30% for capital expenses of the investor (investment subsidy, after coming into operation), guarantee of legal stability concerning the increase of tax rate (except VAT and excise tax) and in the employment sector, the right to invite foreign workers. This package will be provided for all new enterprises realizing investment priority projects of no less than $20 million in the priority spheres of economy. In addition, we introduced the 'one window' principle in order to support our investors that have made a contract, and the institute of investment ombudsman to protect the rights and interests of investors. We are hoping that these innovations in the legal system of Kazakhstan will affect our annual ratings in a positive way.

Investors protection is an important task for every country, in order to increase the country's popularity in the wide world. What can guarantee low investment risk in Kazakhstan?

What makes Kazakhstan attractive for investors is macroeconomic, social, and political stability. Kazakhstan today presents great opportunities and real potential, for large companies and medium-size businesses. Kazakhstan is more advanced in many rankings compared to its close neighbors like China and Russia. The ranking World Bank “Ease of Doing Business 2015" report reported that Kazakhstan occupies position number 77 out of 189 countries, while China is at position 90. At the same time, Kazakhstan stands ahead of Russia in the ranking of Global Competitiveness, issued by the World Economical Forum, occupying position 50 out of 144 countries, while Russia stands at position 53. We would like to underline such indicators as the effectiveness of out labor market to investors. Here, Kazakhstan is positioned at 15, and for investors protection Kazakhstan is at 22, which is well ahead of many other countries, even advanced ones such as Turkey or the Czech Republic. Moreover, according to S&P, in 2014 Kazakhstan has a high rating in the long-term ranking of foreign currency. Above all, Kazakhstan also stands ahead of many of its neighbors in attractiveness of tax rates.