Kazakhstan Map

Putting all your eggs is one basket has never proved to be an effective investment strategy. The Republic of Kazakhstan, a post-Soviet Central Asian state with a population of 16.6 million, has come a long way in realizing the merits of economic diversification.  After independence in 1991, the country fell into a resource dependency trap with the lion's share of its GDP being produced in the oil and gas sectors. Even between 2000 and 2010, more than 40% of its foreign direct investment benefited Kazakhstan’s energy industry.  The situation is now changing in a drastic way and, naturally, under government supervision.

Kazakhstan has adopted an ambitious modernization plan targeting  12 priority sectors, including transport, machinery production, pharmaceuticals, space activities, IT and biotechnology, and tourism. At least 152 projects are involved, with the total investment - approaching US $500 billion - to be implemented by 2015.

With its long history in precision industries and the technological know-how, Switzerland has had a special role to play in this government-led modernization plan. This was the key message delivered by KAZNEX INVEST, a government investment promotion body, during a presentation organized by the Zurich-based Joint Chamber of Commerce for Russia, Ukraine, Kazakhstan, Belarus, Kyrgyzstan, and Moldova.  The message was clear: invest in our economy under extremely favorable conditions.

The incentive structure proposed by the Kazakh government to lure foreign investors could be seen as a basket of the usual far - with some occasional surprises.  Amongst corporate tax breaks ranging from 50 to 100% and exemptions on customs duties, there are also the so-called “state natural grants” that come in the form of land ownership given to foreign companies in exchange for invested capital.

Another modernization initiative concerns the area of transportation. A 3,000 km modern Silk Road is being constructed on Kazakhstan’s territory. It will connect China with Russia and Western Europe. The total cost of the “Western Europe –Western China” corridor is estimated around US $ 6.7 billion. The World Bank, the EBRD, the Asian Development Bank and the Islamic Bank of Development are amongst major lenders. The initiative has been defined as a “people’s project” by the country’s 20-year long incumbent President Nazarbaev, as the completion of the corridor is expected to raise trade flows and employment.

In the trade arena, Kazakhstan has embraced the policy of regional integration, forming a Customs Union along with Russia and Belarus. Expected to evolve into the Eurasian Economic Community on January 1, 2012, this single economic space was designed to facilitate free movement of labor, goods, services, and capital. But Russia’s likely entry into the WTO raises serious concerns about the future of this regional economic arrangement.  

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EuroAsian Routes Survey © By Antoine Mazelier

Photo © By Gene Thorp - The Washington Post