SWEET AND TENGE DELIGHT

Kazakhstan 2017 | EXECUTIVE GUIDE | REVIEW: DOING BUSINESS

Though Kazakhstan's macroeconomic outlook has suffered enormously in the past few years from the collapse in oil prices and currency devaluation, its political leadership strengthened long-term ties with the Russia, the West, and China and drastically increased the ease of doing business.

undefined

The last 18 months have not been an easy time to do business in Kazakhstan. In step with other carbon-producing countries, the value of the local currency, the tenge, collapsed and the nominal value of GDP in dollar terms shrunk by 25% from 2013 through 2015. Real incomes dropped for the first time since 1999, and GDP growth for 2017 was predicted to be the slowest in 17 years, at 0.1%. Should oil remain below USD55/barrel, then growth will not exceed 1%, says President Nazarbayev's son-in-law, Timur Kulibayev, a powerful business figure. By all accounts, things are the grimmest they have been for doing business in several decades.

A closer look, however, reveals a more complicated picture. In July 2016 Chevron, Lukoil, and ExxonMobil agreed to making a USD37 billion investment in the Tengiz field, a show of long-term confidence that is encouraging other players across the board. Output in this field is expected to increase by 50% over the next five years, which should also prove a great boost to Kazakhstani foreign currency deposits. Even though Western and Russian oil companies are having the pick of the litter in carbon deposits, the Chinese are aggressively investing in infrastructure. Slated to pour some USD26 billion into infrastructural projects between 2017 and 2022, Beijing is particularly keen on carving out its own niche as a nouveau Silk Road and an alternative footbridge between itself and Europe.

In spite of—or arguably more accurately—in response to the aforementioned macroeconomic setbacks, Kazakhstan also set about restructuring the way it does business on many levels. Though still just outside the top 20 according to the World Bank's “Doing Business” index, it has shown the greatest improvement of any medium-income country in the world. Its ease of starting a business increased nine places, from the 54th easiest country in the world to 45th. For a country with a still-booming construction sector (and which will only pick up once the currency bottoms out and oil from Tengiz starts flowing at higher rates), its improvement in “Gaining construction permits” was perhaps the most impressive: up 56 places from 78th in the world to 22nd. For registering property, it held its ground at 18th, but surged 27 places in “getting electricity” from 102nd to 75th.

Its greatest assets show in two of the most important categories for doing business anywhere: enforcing contracts, where it remained the ninth-easiest country in the world to do business, and protecting minority investors, where it surged 22 places from 25th in the world to third. In addition to the winds of political liberalism and decentralization blowing from the corridors of power in Astana in the autumn of 2016, these more concrete improvements to the tangible, everyday aspects of doing business in Kazakhstan are very clear signs that the government means business, regardless of the price of oil. The only key regards in which indicators for Kazakhstan fell were in paying taxes and getting credit, the former dipping five places to 75th and the latter falling three to 60th.

Of all the major legal procedures involved in opening a business (state registration of legal entity, making a company seal, opening a current bank account, registering for VAT, and registering for the obligatory insurance of life and health for employees), none take longer than a day and all but one (making a company seal: KZT5,000-10,000) are free of charge.