country report 06.03.19 - sk.kz€¦ · government policies are implemented according to the...

MARCH 2019

RESEARCH & KNOWLEDGE MANAGEMENT

KAZAKHSTAN COUNTRY REPORT

1

CONTENT

KAZAKHSTAN COUNTRY REPORT

Section 1.0 Kazakhstan’s macroeconomic outlook 3

GDP growth reviewBox: Key highlights of Kazakhstan’s development progress

Fiscal positionInflation and monetary policyUSDKZT exchange rateExternal positionForeign direct investmentGlobal commodity marketsRegional economiesSummary: 2019 outlook

Section 2.0 Why invest in Kazakhstan? 16

Strategic locationEstablished market accessPolitical, social and economic stabilityRule of Law and investor’s rights protectionBusiness-friendly environmentTalented and skilled labor forceComprehensive Strategic VisionRobust infrastructureMeasures of State support for investorsSpecial Economic Zones and investment incentives

Appendix: Kazakhstan’s Key Indicators 24

Section 1.0 Kazakhstan’s Macroeconomic OutlookREFER TO DISCLAIMER & DISCLOSURES AT THE END OF THIS PUBLICATION

3

16

24

2

Section 1.0 Kazakhstan’s macroeconomic outlook

2018 GDP review. Taking cue from the economic recovery in 2017, Kazakhstan’s growth momentum continued in 2018. GDP growth stood at 4.1% in 2018, supported by increased oil production (+6.3% YoY),increased trade activity (+7.6% YoY) and positive growth in the mining and quarrying, manufacturing and transportation sectors (+4.6% YoY, +4.0%YoY and +4.6% YoY respectively). The short-term economic indicator (>60% of GDP), a gauge for change in production indices of basic industries, grew by 4.7% during the same period. Kazakhstan’s 2018 GDP growth of 4.1% exceeded earlier official projection of 3.8%, mainly attributed to (1) higher oil production driven by Kashagan, (2) commodity markets rebalance on the back of growing global demand and stockpiles drawdown, (3) continued infrastructure development produces a multiplier effect on the economy, and (4) positive growth among Kazakhstan’s key trading partners facilitates trade and investment flows.

Reflecting Kazakhstan’s strong government and external balance sheets, as well as relatively robust economic activity anticipated over the period 2019-2020, Standard & Poor’s reaffirmed Kazakhstan’s sovereign ratings at BBB- in March 2019, with a stable outlook.

GDP Growth Trend % YoY (2016-2018) GDP Growth vs. Brent Price (2015-2023f)

Source: Statistics Committee, Ministry of National Economy as at 26 November 2018 for 2019-2023 forecasts,Bloomberg, Samruk Kazyna

Outlook 2019-2023. Looking forward, GDP growth is forecasted to average at 4.1% per annum during 2019-2023. As traditional sectors of Kazakhstan’s economy reach their full growth potential, alternative sectors such as transportation, logistics, construction and manufacturing will emerge as drivers of future growth. Thiswill require measures to stimulate productivity growth across all sectors of the economy. While the government exhibits fiscal prudence, it remains committed to implement reforms aimed at digitalization of the economy, advancing human capital development and enhancing infrastructure. Total allocation towards development programs and supporting the real economy is at KZT4.0tln in 2019-2021. Other ongoing measures include creating a robust investment and business climate to stimulate the development of small-and-medium-sized enterprises.

Samruk Kazyna plays a pivotal role in Kazakhstan’s economic development, acting as a vehicle in attracting investments, introducing and implementing advanced technologies and knowledge in driving operational efficiency of its portfolio companies.

-0.1

0.1 0.41.1

3.64.3 4.3 4.0 4.1 4.2 4.1 4.1

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

4Q

18

20

30

40

50

60

70

80

0.0

1.0

2.0

3.0

4.0

5.0

2015

2016

2017

2018

2019

f

2020

f

2021

f

2022

f

2023

f

GDP % Oil price USDpb (RHS)

2

Section 1.0 Kazakhstan’s macroeconomic outlook

2018 GDP review. Taking cue from the economic recovery in 2017, Kazakhstan’s growth momentum continued in 2018. GDP growth stood at 4.1% in 2018, supported by increased oil production (+6.3% YoY),increased trade activity (+7.6% YoY) and positive growth in the mining and quarrying, manufacturing and transportation sectors (+4.6% YoY, +4.0%YoY and +4.6% YoY respectively). The short-term economic indicator (>60% of GDP), a gauge for change in production indices of basic industries, grew by 4.7% during the same period. Kazakhstan’s 2018 GDP growth of 4.1% exceeded earlier official projection of 3.8%, mainly attributed to (1) higher oil production driven by Kashagan, (2) commodity markets rebalance on the back of growing global demand and stockpiles drawdown, (3) continued infrastructure development produces a multiplier effect on the economy, and (4) positive growth among Kazakhstan’s key trading partners facilitates trade and investment flows.

Reflecting Kazakhstan’s strong government and external balance sheets, as well as relatively robust economic activity anticipated over the period 2019-2020, Standard & Poor’s reaffirmed Kazakhstan’s sovereign ratings at BBB- in March 2019, with a stable outlook.

GDP Growth Trend % YoY (2016-2018) GDP Growth vs. Brent Price (2015-2023f)

Source: Statistics Committee, Ministry of National Economy as at 26 November 2018 for 2019-2023 forecasts,Bloomberg, Samruk Kazyna

Outlook 2019-2023. Looking forward, GDP growth is forecasted to average at 4.1% per annum during 2019-2023. As traditional sectors of Kazakhstan’s economy reach their full growth potential, alternative sectors such as transportation, logistics, construction and manufacturing will emerge as drivers of future growth. Thiswill require measures to stimulate productivity growth across all sectors of the economy. While the government exhibits fiscal prudence, it remains committed to implement reforms aimed at digitalization of the economy, advancing human capital development and enhancing infrastructure. Total allocation towards development programs and supporting the real economy is at KZT4.0tln in 2019-2021. Other ongoing measures include creating a robust investment and business climate to stimulate the development of small-and-medium-sized enterprises.

Samruk Kazyna plays a pivotal role in Kazakhstan’s economic development, acting as a vehicle in attracting investments, introducing and implementing advanced technologies and knowledge in driving operational efficiency of its portfolio companies.

-0.1

0.1 0.41.1

3.64.3 4.3 4.0 4.1 4.2 4.1 4.1

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

4Q

18

20

30

40

50

60

70

80

0.0

1.0

2.0

3.0

4.0

5.0

2015

2016

2017

2018

2019

f

2020

f

2021

f

2022

f

2023

fGDP % Oil price USDpb (RHS)

3

3

On the global economic front, continued recovery in Central Asia and sustainable growth in China and Europeshould provide positive effects through increased trade, investments and transit volumes. As a result, transportation, transit and logistics industries are expected to become one of the fastest growing sectors in Kazakhstan’s economy. In addition, positive growth in regional economies will form a demand base which is important for stabilizing prices for key commodities in the global markets, contributing to sustainable expansion in Kazakhstan’s traditional commodity sectors.

Risks and challenges remain, which include (1) volatility in the global commodity markets, (2) economic performance of key trading partners which could affect trade and freight turnover, (3) geopolitical tensions in the region may have adverse effects on Kazakhstan (volatility of commodity prices, investment flows and exchange rate fluctuations).

Kazakhstan’s Macroeconomic Dynamics 2019-2023

Source: Ministry of National Economy as at 26 November 2018 for 2019-2023 forecasts, Samruk Kazyna

4

Box: Key highlights of Kazakhstan’s development progress

Duty-free access to the Eurasian Economic Union (EAEU) marketAs an EAEU member, Kazakhstan along with neighboring countries has a direct access to the market of more than 500mln consumers and ensures free movement of goods, services, capital and workforce. Kazakhstan is also a World Trade Organization member since 30 November 2015.

Source: International Monetary Fund, Ministry of National Economy

Fast-growing economy with a long-term plan of sustainable developmentOver the last few years, Kazakhstan’s economy grew at a record pace, outperforming other countries in Central Asia, Russia and the European Union, trailing closely after China. All economic, social and international government policies are implemented according to the Kazakhstan 2050 Strategy, a plan of sustainable long-term development. The Kazakhstan 2050 Strategy is primarily focused on reaching the top 30 of the most development countries in the world by 2050.

GDP Growth Rate, USD in current prices, 2005-2017, %

Source: World Bank

1.2

3.2

5.7

8.9

17

EU

US

Russia

Kazakhstan

China

4

4

Box: Key highlights of Kazakhstan’s development progress

Duty-free access to the Eurasian Economic Union (EAEU) marketAs an EAEU member, Kazakhstan along with neighboring countries has a direct access to the market of more than 500mln consumers and ensures free movement of goods, services, capital and workforce. Kazakhstan is also a World Trade Organization member since 30 November 2015.

Source: International Monetary Fund, Ministry of National Economy

Fast-growing economy with a long-term plan of sustainable developmentOver the last few years, Kazakhstan’s economy grew at a record pace, outperforming other countries in Central Asia, Russia and the European Union, trailing closely after China. All economic, social and international government policies are implemented according to the Kazakhstan 2050 Strategy, a plan of sustainable long-term development. The Kazakhstan 2050 Strategy is primarily focused on reaching the top 30 of the most development countries in the world by 2050.

GDP Growth Rate, USD in current prices, 2005-2017, %

Source: World Bank

1.2

3.2

5.7

8.9

17

EU

US

Russia

Kazakhstan

China

5

5

Center of stability and liberal economic agenda

Adherence to the principles of economic liberalization: by 2020, government participation in the economy will be reduced threefold to 15% under the National Privatization Program.

The best Doing Business 2019 ranking in the region (World Bank), whereby Kazakhstan ranks 1st place in Central Asia, 4th place in Europe and Central Asia, 28th globally (out of 190 countries).

The efficiency of the state regulation and investor support – significant improvements according to the estimates of World Economic Forum 2016-2017.

• Transparency of government decisions: 35th position out of 140 (16 positions higher compared with the 2016 report)

• Investor protection: 3rd position out of 10 (with high proportion of reforms in improving business climate)

Institutional efficiency – the business setup time was reduced from 19 days in 2010 to 5 days in 2017. In Russia, for example, this indicator makes up 11 days and in China is 31 days (World Bank).

One of the lowest income inequality indicators in the world – GINI Index: Kazakhstan 26.3, Norway 25.96, Russia 41.6, China 42.2 (World Bank).

Source: World Bank, Kazakh Invest

One of the leaders in foreign direct investment (FDI) attraction

Gross foreign investments in 2017, % of GDP

Source: Economic Intelligence Unit

0.5

0.6

1.3

2.1

2.2

2.3

2.4

2.8

3.2

3.6

4.0

Russia

Nigeria

Saudi Arabia

India

China

Indonesia

Turkey

UAE

Australia

Canada

Kazakhstan

6

Tax regime – one of the most favorable in the worldKazakhstan’s corporate tax rate is at 20%, while standard value-added tax (VAT) rate is at 12%, lower than neighboring peers.

Corporate Tax Rate Standard VAT Rate

Source: KPMG, VAT Live

Young demographics and fast growing populationKazakhstan ranks 31st on the Human Capital Development Index 2018 among the world’s 157 countries.

Population median age in 2018, years Population growth rate in 2018, %

Source: CIA Factbook, World Bank

1st in the “Cost Effectiveness” category according to the fDi Magazine’s Top 10 Manufacturing Countries of the Future 2018/19

Average annual USDKZT exchange rate

The 2015 devaluation made the cost of Kazakhstan’s production even more competitive.

In the medium-term, the tenge exchange rate is expected at conservative level of 370 during 2019-2023.

Source: National Bank of Kazakhstan

30

25

20

20

20

Germany

China

Turkey

Russia

Kazakhstan

19

18

18

17

12

Germany

Turkey

Russia

China

Kazakhstan

43

40

38

31

31

EU

Russia

China

Turkey

Kazakhstan

0.2

0.2

0.4

0.5

1.0

EU

Russia

China

Turkey

Kazakhstan

149 152179

222

342 326 345

1 2 1 3 1 4 1 5 1 6 1 7 1 8

6

5

Center of stability and liberal economic agenda

Adherence to the principles of economic liberalization: by 2020, government participation in the economy will be reduced threefold to 15% under the National Privatization Program.

The best Doing Business 2019 ranking in the region (World Bank), whereby Kazakhstan ranks 1st place in Central Asia, 4th place in Europe and Central Asia, 28th globally (out of 190 countries).

The efficiency of the state regulation and investor support – significant improvements according to the estimates of World Economic Forum 2016-2017.

• Transparency of government decisions: 35th position out of 140 (16 positions higher compared with the 2016 report)

• Investor protection: 3rd position out of 10 (with high proportion of reforms in improving business climate)

Institutional efficiency – the business setup time was reduced from 19 days in 2010 to 5 days in 2017. In Russia, for example, this indicator makes up 11 days and in China is 31 days (World Bank).

One of the lowest income inequality indicators in the world – GINI Index: Kazakhstan 26.3, Norway 25.96, Russia 41.6, China 42.2 (World Bank).


One of the leaders in foreign direct investment (FDI) attraction

Gross foreign investments in 2017, % of GDP

Source: Economic Intelligence Unit

0.5

0.6

1.3

2.1

2.2

2.3

2.4

2.8

3.2

3.6

4.0

Russia

Nigeria

Saudi Arabia

India

China

Indonesia

Turkey

UAE

Australia

Canada

Kazakhstan

6

Tax regime – one of the most favorable in the worldKazakhstan’s corporate tax rate is at 20%, while standard value-added tax (VAT) rate is at 12%, lower than neighboring peers.

Corporate Tax Rate Standard VAT Rate

Source: KPMG, VAT Live

Young demographics and fast growing populationKazakhstan ranks 31st on the Human Capital Development Index 2018 among the world’s 157 countries.

Population median age in 2018, years Population growth rate in 2018, %

Source: CIA Factbook, World Bank

1st in the “Cost Effectiveness” category according to the fDi Magazine’s Top 10 Manufacturing Countries of the Future 2018/19

Average annual USDKZT exchange rate

The 2015 devaluation made the cost of Kazakhstan’s production even more competitive.

In the medium-term, the tenge exchange rate is expected at conservative level of 370 during 2019-2023.

Source: National Bank of Kazakhstan

30

25

20

20

20

Germany

China

Turkey

Russia

Kazakhstan

19

18

18

17

12

Germany

Turkey

Russia

China

Kazakhstan

43

40

38

31

31

EU

Russia

China

Turkey

Kazakhstan

0.2

0.2

0.4

0.5

1.0

EU

Russia

China

Turkey

Kazakhstan

149 152179

222

342 326 345

1 2 1 3 1 4 1 5 1 6 1 7 1 8

7

7

Fiscal policyKazakhstan’s fiscal policy has been accommodative and focused on creating long-term growth factors with increased investments into infrastructure and human capital. Consolidated budget expenditures for 2018 are estimated at KZT11.29tln, while revenues are expected at KZT11.56tln. Consequently, consolidated budget is estimated at a small surplus of KZT268.9bln or 0.5% of GDP in 2018.

Sustained economic conditions in 2019 and beyond should provide additional oil and non-oil tax revenues, which are expected to improve Kazakhstan’s fiscal position. In 2019, the Government will allocateKZT1,608.8bln on Nurly Zhol program, agriculture development, the State Program for Accelerated Industrial Innovative Development and the development of transport and communication in 2019.

Kazakhstan’s fiscal position remains strong, supported by budgetary surpluses accumulated during the years of commodity boom, allowing the government to continue with key infrastructure programs.According to official estimates, with oil price at a conservative level of USD55 per barrel, international reserves with the National Bank of Kazakhstan are expected to remain robust at 36.4% of GDP as at end-2019. This reflects ample fiscal space and flexibility for the country to absorb economic shocks, if the need arises.

Consolidated Budget Position, KZT blnOil & Non-Oil Revenues Total International Reserves, USD bln

Source: Ministry of National Economy projections as at 26 November 2018 for 2019-2021 forecasts, National Bank of Kazakhstan, Samruk Kazyna

Inflation and monetary policyKazakhstan adopts a free-floating exchange rate regime and inflation targeting monetary policy which reflect domestic and external conditions and supports the country’s growth dynamics. Inflation has fallen from double digit rates in 2016 to 5.3% in 2018, and at the lower range of 5%-7% official target for lastyear.

The National Bank kept its key interest rate unchanged at 9.25% during January 2019 meeting, highlighted that future decisions on the Base Rate will be based on dynamics of actual inflation, inflation forecasts and the degree of realization of risk scenarios. The regulator cautioned that the general inflationary background of the economy remains relatively elevated, with the main risk of price pressure originates from (1) external sector which relates to uncertainty in oil prices and a continuing tendency of growing inflation of key trade partners, and (2) expanding domestic demand adds on to pro-inflationary factor arising from growth in money income in real terms and the planned increase of the minimum wage in 2019.

0

5,000

10,000

15,000

2017 2018e 2019f 2020f 2021fOil revenue Non-oil revenue

0

20

40

60

80

100

120

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19Gross reserves National Oil Fund assets

8

The current level of the Base Rate is expected to support the demand for tenge assets, maintain monetary conditions at a level that is close to neutral, as well as ensures the formation of inflation within the target corridor of 4%-6% by end-2019. National Bank will continue to monitor progress on the general price level.

Base Rate, % Inflation, % YoY

Source: National Bank of Kazakhstan, Bloomberg, Samruk Kazyna

USDKZT exchange rateVolatility and weakening of the USDKZT exchange rate in 2018 reflected combination of several factors (1)stronger USD in anticipation of interest rate hikes in 2019-2020, (2) US sanctions on Russia led to ruble depreciation especially in April and August, (3) escalation of US-China trade disputes causing volatility to global financial markets and emerging market currencies in general, (4) concerns on contagion risk from emerging markets selloffs. The tenge movement did not reflect potential benefits of higher oil prices in 2018 to economic growth (USD69.8pb average vs. USD54.4pb average in 2017).

The USDKZT exchange rate averaged at 344.95 in 2018, within the revised official target of 350 for the year. In the medium-term of 2019-2023, the official target for the USDKZT exchange is at a conservative level of 370. National Bank will continue to maintain a free-floating exchange rate regime and may proceed with minor interventions in the foreign exchange market to level out significant volatility, whenthe need arises.

USDKZT Exchange Rate Trends (2018-2019 year-to-date)

Source: Bloomberg, Samruk Kazyna

0

5

10

15

20

25

30

10 11 12 13 14 15 16 17 18 19CPI Food Non-food Services

0

5

10

15

20

25

30


310

320

330

340

350

360

370

380

390

18:J F M A M J J A S O N D

19:J F

Mar 21: Fed raised interest rates to 1.5-1.75%

Apr 6: US sanctions on Russia

Jun 13: Fed raised rates to 1.75-2.0%, signaled 2 more hikes in 2018

Aug 1: US sanctions on TurkeyAug 8: new US sanctions on Russia

Aug 30: escalation of US-China trade disputes

Sep 6: US discusses possible new sanctions on Russia

Sep 13: Turkey raised interest rate by 625bps to 24% Sep 14: Russia raised interest rate by 25bps to 7.5%

Sep 26: Fed raised rates to 2.0%-2.25%

Dec 19: Fed raised interest rates to 2.25-2.5%

Jan 30: maintained interest rates at 2.25-2.5%

8

8

The current level of the Base Rate is expected to support the demand for tenge assets, maintain monetary conditions at a level that is close to neutral, as well as ensures the formation of inflation within the target corridor of 4%-6% by end-2019. National Bank will continue to monitor progress on the general price level.

Base Rate, % Inflation, % YoY

Source: National Bank of Kazakhstan, Bloomberg, Samruk Kazyna

USDKZT exchange rateVolatility and weakening of the USDKZT exchange rate in 2018 reflected combination of several factors (1)stronger USD in anticipation of interest rate hikes in 2019-2020, (2) US sanctions on Russia led to ruble depreciation especially in April and August, (3) escalation of US-China trade disputes causing volatility to global financial markets and emerging market currencies in general, (4) concerns on contagion risk from emerging markets selloffs. The tenge movement did not reflect potential benefits of higher oil prices in 2018 to economic growth (USD69.8pb average vs. USD54.4pb average in 2017).

The USDKZT exchange rate averaged at 344.95 in 2018, within the revised official target of 350 for the year. In the medium-term of 2019-2023, the official target for the USDKZT exchange is at a conservative level of 370. National Bank will continue to maintain a free-floating exchange rate regime and may proceed with minor interventions in the foreign exchange market to level out significant volatility, whenthe need arises.

USDKZT Exchange Rate Trends (2018-2019 year-to-date)


0

5

10

15

20

25

30


0

5

10

15

20

25

30


310

320

330

340

350

360

370

380

390

18:J F M A M J J A S O N D

19:J F

Mar 21: Fed raised interest rates to 1.5-1.75%

Apr 6: US sanctions on Russia

Jun 13: Fed raised rates to 1.75-2.0%, signaled 2 more hikes in 2018

Aug 1: US sanctions on TurkeyAug 8: new US sanctions on Russia

Aug 30: escalation of US-China trade disputes

Sep 6: US discusses possible new sanctions on Russia

Sep 13: Turkey raised interest rate by 625bps to 24% Sep 14: Russia raised interest rate by 25bps to 7.5%

Sep 26: Fed raised rates to 2.0%-2.25%

Dec 19: Fed raised interest rates to 2.25-2.5%

Jan 30: maintained interest rates at 2.25-2.5%

9

9

External positionKazakhstan’s external position improved significantly in 2018 due to more favorable terms of trade. With exports posting solid recovery, preliminary estimates show that current account registered a positive balance of USD925.4mln or approximately 0.6% of GDP in 2018, the first time since 2014.

For full year 2018, Kazakhstan’s external trade turnover is estimated to have increased by 18.2% YoY to USD96.4bln. This was supported by an estimated 25.2% YoY growth on total exports to USD61.9bln, with imports rose by 7.5% YoY to USD34.5bln. Trade balance for the year was at USD27.4bln, an increase of 57.9% YoY. In the medium-term, Kazakhstan’s total trade turnover is projected to increase moderately, potentially exceed USD105bln by 2023.

External Trade USD bln (2018-2023f) Current Account Balance (2018-2023f)

Source: Ministry of National Economy as at 26 November 2018 for 2019-2023 forecasts, Samruk Kazyna

Further development of Kazakhstan’s regional connectivity and transport infrastructure under the Nurly Zhol program and the China’s Belt and Road Initiative (BRI) is expected to contribute significantly to the growth of Kazakhstan’s external trade and transit volumes. China is expected to provide more than USD250bln to fund infrastructure projects in Asia region, with Kazakhstan being one of the primary beneficiaries. As a result, attracting additional cargo flows via Kazakhstan routes will increase transit freight volumes by all modes of transport from the current 17.5mln tons to 33mln tons in 2020 and 50mln tons in 2030.Consequently, industries which are primarily engaged in transportation or processing of containerized cargo, are expected to outperform the overall Kazakhstan’s economy over the medium term, with the growth exceeding GDP growth. These industries comprise rail and road transportation, logistics and marine, rail and road infrastructure.

BRI implementation in Kazakhstan is expected to be faster than in other participating countries due to substantial synergies with Nurly Zhol program and optimized legal and regulatory infrastructure framework. The majority of Nurly Zhol projects may be considered as a part of a broader BRI framework, as they directly contribute to the improvement of Kazakhstan’s infrastructure and EU-Asia transit potential. It is worth noting that more than 3,000km out of 10,000km in total of transportation under BRI will run through Kazakh territory, making the country an important stretch of the mainland corridor. BRI is forecasted to contribute additional 4.5%-7.0% to Kazakhstan’s GDP growth by 2021, creating over 200,000 new jobs. Thecountry’s economy will considerably benefit from ongoing infrastructure improvements, with total investments size reaching more than USD7bln over next five years.

2122232425262728

0

20

40

60

80

100

120

2018e 2019f 2020f 2021f 2022f 2023f

Exports Imports Trade balance (RHS)

-2.5-2.0-1.5-1.0-0.50.00.51.0

-5-4-3-2-1012

2018e 2019f 2020f 2021f 2022f 2023f

Current account USD bln % of GDP (RHS)

10

Foreign direct investmentGross inflows of FDI were equally strong in 2018, amounted to USD17.34bln in the first nine months of the year, according to preliminary estimates from National Bank. Based on this momentum, 2018 FDI inflows could potentially reach USD23bln (2017: USD20.77bln). Since 2005, Kazakhstan attracted cumulative FDI of more than USD281bln.

Inflow of investments went to traditional sectors, such as mining with total investments of USD85.74bln or 30.6% (mainly in the extraction of crude petroleum and natural gas), as well as investments into professional, scientific and technical activities at USD87.52bln or 31.2% (majority relates to geological exploration and prospecting activities). The oil and gas, natural resources and extractive industries continue to remain the most attractive sectors for investments, comprising more than half of Kazakhstan’s accumulated FDI inflows to-date. Nonetheless, the manufacturing, wholesale and retail trade, financial services, and construction attracted commendable investments of USD38.28bln (13.7%), USD27.33bln (9.8%), USD13.07bln (4.7%) and USD9.30bln (3.3%) respectively, reflecting relative success of Kazakhstan’s efforts to diversify the economy.

Gross FDI Inflows Trends, USD bln FDI Inflows by Sector (as at 9M18)

Source: National Bank of Kazakhstan, Samruk Kazyna

Netherlands remains the largest investor (domiciled by country) in Kazakhstan with investments amounted to USD82.65bln, while the US has USD23.14bln investments in the country. Other major investors include Switzerland, China, France, UK and Russia. Kazakhstan has increasingly been receiving FDI from China namely within the Belt and Road Initiative. New Asian partners such as China, India and even Iran are gradually joining Kazakhstan's traditional investment partners to invest in the country. However, they have yet to fully substitute Russia and western investors.

Kazakhstan ranks 1st place globally in protecting foreign investors and minority shareholders for the second consecutive year, according to the World Bank Doing Business 2019 report, up from 3rd place in 2017. The World Bank also places Kazakhstan 1st place in terms of doing business in Central Asia, 4th

place within Europe and Central Asia, and 28th place globally. Index of transaction transparency, index of manager’s responsibility and index of investment protection are well above the average for Eastern Europe and Central Asia. Government policy has been encouraging foreign investment with measures such as reduction and in some cases waiver of taxes for five years, state subsidies, partial or total exemption from duties and taxes on equipment and other materials.

0

5

10

15

20

25

30

35

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

9M18

31%

30%

14%

10%

5%3%

7%Prof, science & tech

Mining & quarrying

Manufacturing

Wholesale & retail trade

Financial services

Construction

Others

10

10

Foreign direct investmentGross inflows of FDI were equally strong in 2018, amounted to USD17.34bln in the first nine months of the year, according to preliminary estimates from National Bank. Based on this momentum, 2018 FDI inflows could potentially reach USD23bln (2017: USD20.77bln). Since 2005, Kazakhstan attracted cumulative FDI of more than USD281bln.

Inflow of investments went to traditional sectors, such as mining with total investments of USD85.74bln or 30.6% (mainly in the extraction of crude petroleum and natural gas), as well as investments into professional, scientific and technical activities at USD87.52bln or 31.2% (majority relates to geological exploration and prospecting activities). The oil and gas, natural resources and extractive industries continue to remain the most attractive sectors for investments, comprising more than half of Kazakhstan’s accumulated FDI inflows to-date. Nonetheless, the manufacturing, wholesale and retail trade, financial services, and construction attracted commendable investments of USD38.28bln (13.7%), USD27.33bln (9.8%), USD13.07bln (4.7%) and USD9.30bln (3.3%) respectively, reflecting relative success of Kazakhstan’s efforts to diversify the economy.

Gross FDI Inflows Trends, USD bln FDI Inflows by Sector (as at 9M18)

Source: National Bank of Kazakhstan, Samruk Kazyna

Netherlands remains the largest investor (domiciled by country) in Kazakhstan with investments amounted to USD82.65bln, while the US has USD23.14bln investments in the country. Other major investors include Switzerland, China, France, UK and Russia. Kazakhstan has increasingly been receiving FDI from China namely within the Belt and Road Initiative. New Asian partners such as China, India and even Iran are gradually joining Kazakhstan's traditional investment partners to invest in the country. However, they have yet to fully substitute Russia and western investors.

Kazakhstan ranks 1st place globally in protecting foreign investors and minority shareholders for the second consecutive year, according to the World Bank Doing Business 2019 report, up from 3rd place in 2017. The World Bank also places Kazakhstan 1st place in terms of doing business in Central Asia, 4th

place within Europe and Central Asia, and 28th place globally. Index of transaction transparency, index of manager’s responsibility and index of investment protection are well above the average for Eastern Europe and Central Asia. Government policy has been encouraging foreign investment with measures such as reduction and in some cases waiver of taxes for five years, state subsidies, partial or total exemption from duties and taxes on equipment and other materials.

0

5

10

15

20

25

30

35

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

9M18

31%

30%

14%

10%

5%3%

7%Prof, science & tech

Mining & quarrying

Manufacturing

Wholesale & retail trade

Financial services

Construction

Others

11

12

Brent Price, USD pb (2018- 2019YTD) Uranium Spot Price, USD lb (2018-2019YTD)


Meanwhile on uranium, prices surged 43% since touching last year’s low of USD20.25lb in April, due to the combination of decrease in oversupply (as key producers cut output) and higher demand. Market expectations are that there could be a supply deficit this year, the first time in more than 10 years, indication of a turning point where fundamentals could have improved for the uranium market. Uranium spot price climbed for seven months through November, the longest run since 2014. Prices hit a two-year high at USD29.15/lb on 14November. Uranium prices were last traded at USD27.75/lb on 28 February 2019.

In the long-term, very few mines will be developed at today’s price level, which can lead to the shortages of supply in the long-term. According to market research, approximately 50% of mines are still cashflow negative at current prices. Producers would stop shutting output at USD45/lb and some new supply would come online at USD65-USD75. This, combined with a significant new nuclear power generation capacity being constructed in China and India, may support uranium prices in the longer-term.

Regional economiesIn the first half of 2018, global economic growth lost some of the strong momentum registered in second half of 2017, and expansion became less synchronized across regions and countries. Economic activity moderated in some large advanced economies (Europe, Japan), while emerging markets (China), buoyed by domestic demand, continued to expand at broadly the same pace in 2017. The US economy maintained robust growth, especially in 2Q18 with the private sector activity boosted further by sizable fiscal stimulus. Nevertheless, the balance of risks to global growth has shifted downside in the context of elevated political and policy uncertainty. Some downside risks such as rising trade barriers and a reversal of capital flows to emerging markets have become more pronounced or have partially materialized. All these are against the backdrop of tighter monetary conditions and dissipating global slacks. Therefore, the International Monetary Fund revised downward its projections for global GDP growth to 3.5% for 2019 vs. earlier forecast of 3.7%. Meanwhile, the World Bank maintains a more conservative growth forecasts of 2.9% for 2019 vs. earlier projection of 3.0%.

Growth prospects of neighboring countries remain commendable to-date. Being one of the largest key trade partners of Kazakhstan, preliminary estimates showed that Russia’s economy grew by 2.3% in 2018, the fastest growth pace since 2012 and exceeded official target of 1.5%-2.0%. However in the absence of structural reforms needed to sustain longer-term growth, Russia’s GDP growth is expected to moderate to 1.2%-1.7% in 2019. Meanwhile in China, economic growth expanded by 6.6% in 2018, exceeded official targetof 6.5%. 2019 GDP growth is projected to moderate slightly to 6.0%-6.5%, underpinned by fiscal and monetary measures to boost growth. In the euro area, growth was estimated at 1.9% in 2018 on the back of improved exports and labor market conditions. GDP growth is projected to moderate to 1.7% in 2019 as monetary

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Demand growth from OECD & China, signs of market rebalancing

Concerns on oversupply in 1H19

1719212325272931

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17Fe

b-17

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11

Kazakhstan ranks 28th in the World Bank’s Ease of Doing Business 2019 (out of 190), and is among the most improving economies

Source: World Bank’s Doing Business 2019 Report

Global commodities outlook2018 saw oil prices fluctuated significantly especially towards 4Q18, driven mostly by supply factors. In early October, Brent prices surged to a record high on supply concerns that looming US sanctions on Iranian crude exports along with chronic production losses in Venezuela would leave markets short of supply later of theyear. Concurrently, inventory data showed that the OECD oil stockpiles were drawdown to below 5-year average, stoking further panic of a potential supply shortage. Nevertheless, prices retreated significantly to a one-year low in November and December, as attention diverts to the demand threats posed by faltering emerging economies and the US-China trade dispute. A report on the potential US oil inventory built in 1H19, US waivers on selected countries in continuing oil purchases from Iran after the sanctions kicked in, as well as record high production in key OPEC producers contributed further to the downward pressures on oil prices.

The oil market is being continually tested with prices reacting to newsflows on demand and supply dynamics.Despite OPEC+ decision to cut oil production into 1H19, oil prices fail to pick up from the USD60pb-level. Brent contract for delivery in April 2019 was last traded at USD66.31pb on 28 February 2019. It reached a low of USD51.31pb on 24 December, down 40% from last year’s high of USD84.48pb on 3 October. Meanwhile, WTI spot price closed at USD57.22pb on 28 February 2019, a decline of 25% from October’s high of USD76.41pb.

12

12

Brent Price, USD pb (2018- 2019YTD) Uranium Spot Price, USD lb (2018-2019YTD)


Meanwhile on uranium, prices surged 43% since touching last year’s low of USD20.25lb in April, due to the combination of decrease in oversupply (as key producers cut output) and higher demand. Market expectations are that there could be a supply deficit this year, the first time in more than 10 years, indication of a turning point where fundamentals could have improved for the uranium market. Uranium spot price climbed for seven months through November, the longest run since 2014. Prices hit a two-year high at USD29.15/lb on 14November. Uranium prices were last traded at USD27.75/lb on 28 February 2019.

In the long-term, very few mines will be developed at today’s price level, which can lead to the shortages of supply in the long-term. According to market research, approximately 50% of mines are still cashflow negative at current prices. Producers would stop shutting output at USD45/lb and some new supply would come online at USD65-USD75. This, combined with a significant new nuclear power generation capacity being constructed in China and India, may support uranium prices in the longer-term.

Regional economiesIn the first half of 2018, global economic growth lost some of the strong momentum registered in second half of 2017, and expansion became less synchronized across regions and countries. Economic activity moderated in some large advanced economies (Europe, Japan), while emerging markets (China), buoyed by domestic demand, continued to expand at broadly the same pace in 2017. The US economy maintained robust growth, especially in 2Q18 with the private sector activity boosted further by sizable fiscal stimulus. Nevertheless, the balance of risks to global growth has shifted downside in the context of elevated political and policy uncertainty. Some downside risks such as rising trade barriers and a reversal of capital flows to emerging markets have become more pronounced or have partially materialized. All these are against the backdrop of tighter monetary conditions and dissipating global slacks. Therefore, the International Monetary Fund revised downward its projections for global GDP growth to 3.5% for 2019 vs. earlier forecast of 3.7%. Meanwhile, the World Bank maintains a more conservative growth forecasts of 2.9% for 2019 vs. earlier projection of 3.0%.

Growth prospects of neighboring countries remain commendable to-date. Being one of the largest key trade partners of Kazakhstan, preliminary estimates showed that Russia’s economy grew by 2.3% in 2018, the fastest growth pace since 2012 and exceeded official target of 1.5%-2.0%. However in the absence of structural reforms needed to sustain longer-term growth, Russia’s GDP growth is expected to moderate to 1.2%-1.7% in 2019. Meanwhile in China, economic growth expanded by 6.6% in 2018, exceeded official targetof 6.5%. 2019 GDP growth is projected to moderate slightly to 6.0%-6.5%, underpinned by fiscal and monetary measures to boost growth. In the euro area, growth was estimated at 1.9% in 2018 on the back of improved exports and labor market conditions. GDP growth is projected to moderate to 1.7% in 2019 as monetary

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Bearish sentiment due to high oil stocks, excess supply

Increased bet of potential supply shortgage

Demand growth from OECD & China, signs of market rebalancing

Concerns on oversupply in 1H19

1719212325272931

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17Fe

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ay-1

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13

13

stimulus is withdrawn. Despite the resilience demonstrated thus far, the longer-term negative implications could originate from moderating global trade and investment, persistent trade tensions and financial market pressures, as well as tightening financing conditions. Future economic performance of key trading partners will have implications on Kazakhstan through trade, investments and transit volumes. Any economic uncertaintyin the region will cause volatility to commodity prices and financial markets sentiment.

GDP Growth Comparison (2017-2019f) Kazakhstan’s Key Trade Partners by Total Trade Turnover, (2018)

Source: Central Banks, Statistics Committee, Bloomberg, Samruk Kazyna

Macroeconomic indicators of Kazakhstan’s key trading partnersIndicator Eurozone Russia China Kazakhstan

GDP growth 2019f 1.7% 1.2%-1.7% 6.0%-6.5% 3.8%Unemployment rate %, December 2018

7.9% 4.8% 3.82%* 4.9%

Inflation % YoY, January 2019 1.5% 5.0% 1.7% 5.2%Benchmark interest rate %, as at February 2019

0.00% 7.75% 4.35% 9.25%

PMI Manufacturing, February 2019

49.3 50.1 49.2 N.A.

PMI Services, February 2019 52.3 55.3 54.3 N.A.Source: Central Banks, Ministry of National Economy as at 26 November 2018 forecasts, Bloomberg*as at 3Q18

2.3 1.9 1.72.3

2.92.3

1.52.3

1.5

6.9 6.6 6.2

0

2

4

6

8

2017 2018e 2019f

Eurozone US Russia China

40%

19%

13%

6%6%

2% 14% EuropeRussiaChinaCIS (excl Russia)Asia (excl China)USOthers

14

2019 outlookKazakhstan’s economy remains resilient, gradually adapting to the “new normal” global environment. Taking cue from the economic recovery in 2017, the country’s GDP growth expanded 4.1% in 2018, mainly attributedto (1) higher oil production driven by Kashagan, (2) commodity markets rebalance on the back of growing global demand and stockpiles drawdown, (3) continued infrastructure development produces a multiplier effect on the economy, and (4) positive growth among Kazakhstan’s key trading partners facilitates trade and investment flows.

In the medium-term, GDP growth is forecasted to average at 4.1% per annum between 2019 and 2023.As traditional sectors of Kazakhstan’s economy reach their full growth potential, alternative sectors such as transportation, logistics, construction and manufacturing will emerge as drivers of future growth.

Kazakhstan’s fiscal position remains strong, supported by budgetary surpluses accumulated during the years of commodity boom, allowing the government to continue with key infrastructure programs. According to official estimates, with oil price at a conservative level of USD55 per barrel, international reserves with National Bank are expected to remain robust at 36.4% of GDP as at end-2019, reflecting ample fiscal space and flexibility for the country to absorb economic shocks, if the need arises.

Reflecting Kazakhstan’s strong government and external balance sheets, as well as relatively robust economic activity anticipated over the period 2019-2020, Standard & Poor’s reaffirmed Kazakhstan’s sovereign ratings at BBB- in September 2018, with a stable outlook.

On exchange rate and monetary policies, Kazakhstan adopts a free-floating exchange rate regime and inflation targeting which reflect domestic and external conditions and supports the country’s growth dynamics. The current level of the Base Rate is sufficient to support the demand for tenge assets and is accommodative for domestic growth. Furthermore, inflation is expected to remain within the target corridor of 4%-6% by end-2019. On the USDKZT exchange rate, it is expected to remain stable at a conservative level of 370 in 2019.

On regional economies, the growth prospects of Kazakhstan’s key trade partners remain commendable to-date. Russia’s economy is expected to grow by 1.2%-1.7% in 2019, following an estimated growth rate of 2.3% in 2018. Meanwhile, China’s 2019 GDP growth is projected to moderate slightly to 6.0%-6.5% (2018: 6.6%), underpinned by fiscal and monetary measures to boost growth. In the euro area, GDP growth is projected to moderate to 1.9% in 2019 (1.9% estimate for 2018) as monetary stimulus is withdrawn. Future economic performance of key trading partners are important as it will have implications on Kazakhstan through trade, investments and transit volumes. Any economic uncertainty in the region will cause volatility to commodity prices and financial markets sentiment.

Kazakhstan’s economy is highly reliant on natural resources and extractive industries, and the constant change in global economic dynamics has made it more challenging for the country to stay competitive and sustain growth in the longer-term. Now is the opportune time for Kazakhstan to explore new opportunities and venture into new growth areas, both domestically and abroad, together with our potential partners.

14

14

2019 outlookKazakhstan’s economy remains resilient, gradually adapting to the “new normal” global environment. Taking cue from the economic recovery in 2017, the country’s GDP growth expanded 4.1% in 2018, mainly attributedto (1) higher oil production driven by Kashagan, (2) commodity markets rebalance on the back of growing global demand and stockpiles drawdown, (3) continued infrastructure development produces a multiplier effect on the economy, and (4) positive growth among Kazakhstan’s key trading partners facilitates trade and investment flows.

In the medium-term, GDP growth is forecasted to average at 4.1% per annum between 2019 and 2023.As traditional sectors of Kazakhstan’s economy reach their full growth potential, alternative sectors such as transportation, logistics, construction and manufacturing will emerge as drivers of future growth.

Kazakhstan’s fiscal position remains strong, supported by budgetary surpluses accumulated during the years of commodity boom, allowing the government to continue with key infrastructure programs. According to official estimates, with oil price at a conservative level of USD55 per barrel, international reserves with National Bank are expected to remain robust at 36.4% of GDP as at end-2019, reflecting ample fiscal space and flexibility for the country to absorb economic shocks, if the need arises.

Reflecting Kazakhstan’s strong government and external balance sheets, as well as relatively robust economic activity anticipated over the period 2019-2020, Standard & Poor’s reaffirmed Kazakhstan’s sovereign ratings at BBB- in September 2018, with a stable outlook.

On exchange rate and monetary policies, Kazakhstan adopts a free-floating exchange rate regime and inflation targeting which reflect domestic and external conditions and supports the country’s growth dynamics. The current level of the Base Rate is sufficient to support the demand for tenge assets and is accommodative for domestic growth. Furthermore, inflation is expected to remain within the target corridor of 4%-6% by end-2019. On the USDKZT exchange rate, it is expected to remain stable at a conservative level of 370 in 2019.

On regional economies, the growth prospects of Kazakhstan’s key trade partners remain commendable to-date. Russia’s economy is expected to grow by 1.2%-1.7% in 2019, following an estimated growth rate of 2.3% in 2018. Meanwhile, China’s 2019 GDP growth is projected to moderate slightly to 6.0%-6.5% (2018: 6.6%), underpinned by fiscal and monetary measures to boost growth. In the euro area, GDP growth is projected to moderate to 1.9% in 2019 (1.9% estimate for 2018) as monetary stimulus is withdrawn. Future economic performance of key trading partners are important as it will have implications on Kazakhstan through trade, investments and transit volumes. Any economic uncertainty in the region will cause volatility to commodity prices and financial markets sentiment.

Kazakhstan’s economy is highly reliant on natural resources and extractive industries, and the constant change in global economic dynamics has made it more challenging for the country to stay competitive and sustain growth in the longer-term. Now is the opportune time for Kazakhstan to explore new opportunities and venture into new growth areas, both domestically and abroad, together with our potential partners.

15

15

Section 2.0 Why invest in Kazakhstan?

Reasons to invest in Kazakhstan

Source: Kazakh Invest

1. Strategic locationLocated at the heart of the New Silk Road, Kazakhstan enables goods to be transported between China and Western Europe 3 times faster (10-18 days by rails compared to 40 days by sea).


16

2. Established market accessPreferential access to a regional marketplace of more than 500 million customers, with a growing middle class.


3. Political, social and economic stabilityKazakhstan aims to join the club of Top 30 global developed countries by 2050, with ambitious reforms announced under the Kazakhstan 2050 Strategy

2018 estimates of GDP growth (%) & GDP per capita (USD)

Source: International Monetary Fund, Central Banks, Ministry of National Economy, Bloomberg16

16

2. Established market accessPreferential access to a regional marketplace of more than 500 million customers, with a growing middle class.


3. Political, social and economic stabilityKazakhstan aims to join the club of Top 30 global developed countries by 2050, with ambitious reforms announced under the Kazakhstan 2050 Strategy

2018 estimates of GDP growth (%) & GDP per capita (USD)

Source: International Monetary Fund, Central Banks, Ministry of National Economy, Bloomberg 17

17

4. Rule of Law and investor’s rights protection


5. Business-friendly environmentKazakhstan is 28th place in the World Bank’s flagship ranking (out of 190) and among the most improving companies.

Doing Business 2019: Global Ranking Kazakhstan’s ranking in Doing Business 2019 trails behind Canada, Ireland and Germany, it is above Russia and Turkey

Doing Business 2005-2019: Kazakhstan’s Ranking

Source: Doing Business 2019 Report

837776

7471

6951

4643

37323130

2823

1121

QatarIndia

UzbekistanMongolia

UkraineVietnam

ItalyChina

TurkeyBelarusFranceRussiaSpain

KazakhstanIreland

UAESingapore

New Zealand

82

6271 64 63 58

47 49 50 5341 35 36

28

0

20

40

60

80

100

2005

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

AIFC Court and International Arbitration Center

Legally separate and independent from the Republic of Kazakhstan judicial system. It provides a common law court system that operates to the highest international standards to resolve civil and commercial disputes in the AIFC.

Special Proceedings for Investors’ Disputes Resolution according to the Rules of First Instance (National Legislation)

• The Specialized Judicial Board of the Supreme Court of the Republic of Kazakhstan.

• The Court of Astana.

Kazakhstan signed 47 bilateral and 1 multilateral investment treaties.

• Guarantee the rights of investors in case of nationalization, expropriation and requisition;

• Guarantee the legal protection of investors’ activity in the territory of Kazakhstan;

• Guarantee the use of income;

• Regulation of investment dispute resolution.

AIFC – Financial hub of the region

Kazakh Invest – national operator on investment attraction

• Open dialogue window between investors and state.

• Single negotiator on behalf of the Government of the Republic of Kazakhstan.

• Single channel of access to governmental services and implementation of investment projects.

• Investors support.• Solution of investors’

problematic issues.• Negotiations with investors.• Organizations of visits.

• Signing of investment contract.

• Supporting investors in regions.

18

6. Talented and skilled labor forceKazakhstan has the highest literacy rate in the region, most citizens are bilingual with good knowledge of English, while Kazakhstan’s universities focus heavily on STEM subjects.


7. Comprehensive Strategic VisionKazakhstan has emerged as a leading logistics, trade and business hub offering vast investment opportunities and sound financial institutions.


18

18

6. Talented and skilled labor forceKazakhstan has the highest literacy rate in the region, most citizens are bilingual with good knowledge of English, while Kazakhstan’s universities focus heavily on STEM subjects.


7. Comprehensive Strategic VisionKazakhstan has emerged as a leading logistics, trade and business hub offering vast investment opportunities and sound financial institutions.

Source: Kazakh Invest19

20

Investment incentivesCategory Tax preferences/duration Customs

duty exemption/

duration

State in-kind grant

Investment subsidy/ duration

VAT free import

Corporate income tax (reduction by 100%)

Land tax (0% rate)

Property tax (0%

rate)

Investment project

+/5 - - - +/5 + -

Investment priority projectSetup of new production plants

- +/10 +/10 +/8 +/5 + +/3

Expansion and renewal of existing production plants

- +/3 - - +/5 + -

Special investment project

+ (for special entities)

- - - +/15 - -


10. Special Economic Zones (SEZ) and investment incentives


SEZ “National Industrial Petrochemical Technopark” (2007-2032)

Chemistry, Petrochemistry

SEZ “Chemical Park Taraz” (2012-2037)Chemistry

SEZ “Khorgos-Eastern Gates” (2011-2035)

Logistics and trade

SEZ “Seaport Aktau” (2002-2027)Logistics, oil equipment

SEZ “Astana–Technopolis” (2017-2042)

Various

SEZ “Pavlodar” (2011-2036)Chemistry, Petrochemistry,

Metallurgy

SEZ “Astana-New City” (2001-2026)Various

SEZ “Saryarka” (2011-2036)Metallurgy, Heavy engineering

SEZ “Park of Innovative Technologies” (2003-2028)

Information & communications technologies

SEZ “Ontustik” (2005-2030) Textile

SEZ “Turkistan” (2018-2043)Various

SEZ “ICBC Khorgos” (2017-2041) Various, Trade

19

8. Robust infrastructure


9. Measures of State support for investors


Exemption from taxation customs duties State full grants

Customs duty 0% up to 5 years on imports:technology equipment and its components, spare parts, raw materials

VAT exemption on imports

Land, buildings, machinery, equipment

Tax preferences

Customs duty 0% up to 5 years on imports:technology equipment and its components, spare parts, raw materials and materials

Land, buildings, machinery and equipment in the property

Terms of service

Corporate income tax (up to 10 years) – 0%Land tax (up to 10 years) – 0%Property tax (up to 8 years) – 0%

Implementation of the activities included in the list of priority activities identified for the implementation of investment priority projects

Exemption from customs duties on import value added tax

Participants of special economic zones (SEZ) – 0%

Legal entity that has entered into an agreement on the

industrial assembly of motor vehicles

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proj

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20

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Investment incentivesCategory Tax preferences/duration Customs

duty exemption/

duration

State in-kind grant

Investment subsidy/ duration

VAT free import

Corporate income tax (reduction by 100%)

Land tax (0% rate)

Property tax (0%

rate)

Investment project

+/5 - - - +/5 + -

Investment priority projectSetup of new production plants

- +/10 +/10 +/8 +/5 + +/3

Expansion and renewal of existing production plants

- +/3 - - +/5 + -

Special investment project

+ (for special entities)

- - - +/15 - -


10. Special Economic Zones (SEZ) and investment incentives



Chemistry, Petrochemistry

SEZ “Chemical Park Taraz” (2012-2037)Chemistry

SEZ “Khorgos-Eastern Gates” (2011-2035)

Logistics and trade

SEZ “Seaport Aktau” (2002-2027)Logistics, oil equipment

SEZ “Astana–Technopolis” (2017-2042)

Various

SEZ “Pavlodar” (2011-2036)Chemistry, Petrochemistry,

Metallurgy

SEZ “Astana-New City” (2001-2026)Various

SEZ “Saryarka” (2011-2036)Metallurgy, Heavy engineering

SEZ “Park of Innovative Technologies” (2003-2028)

Information & communications technologies

SEZ “Ontustik” (2005-2030) Textile

SEZ “Turkistan” (2018-2043)Various

SEZ “ICBC Khorgos” (2017-2041) Various, Trade

21

21

Special Economic Zones with SK Group’s presence

Source: Kazakh Invest, Samruk Kazyna

0% corporate

income taxFree plot of land

0% Land and property

tax

Simplified procedure for employment

of foreign labor

Exemption from

customs duties

Ready Infrastructure on “plug-and-

play” basis

Special Economic

Zones

Fiscal and non-fiscal incentives of SEZ


• Polymer Production LLP – production of polymer products:

• Kazakhstan Petrochemical Industries Inc LLP –polypropylene production;

• Karabatan Utility Solutions LLP – construction of production infrastructure of the SEZ;

• KLPE LLP – polyethylene production.

SEZ “Khorgos Eastern Gates” (2011-2036)

• KTZE – Khorgos Gateway LLP –strategic facility for the creation of a logistics hub, which will allow to cover the world market from China to Europe, passing through the countries of Central Asia, Turkey and the Persian Gulf countries.

SEZ “Chemical Park Taraz” (2012-2037)

• Projects in petrochemical sector.

22

21

Special Economic Zones with SK Group’s presence

Source: Kazakh Invest, Samruk Kazyna

0% corporate

income taxFree plot of land

0% Land and property

tax

Simplified procedure for employment

of foreign labor

Exemption from

customs duties

Ready Infrastructure on “plug-and-

play” basis

Special Economic

Zones

Fiscal and non-fiscal incentives of SEZ


• Polymer Production LLP – production of polymer products:

• Kazakhstan Petrochemical Industries Inc LLP –polypropylene production;

• Karabatan Utility Solutions LLP – construction of production infrastructure of the SEZ;

• KLPE LLP – polyethylene production.

SEZ “Khorgos Eastern Gates” (2011-2036)

• KTZE – Khorgos Gateway LLP –strategic facility for the creation of a logistics hub, which will allow to cover the world market from China to Europe, passing through the countries of Central Asia, Turkey and the Persian Gulf countries.

SEZ “Chemical Park Taraz” (2012-2037)

• Projects in petrochemical sector.

22

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23

23

Appendix: Kazakhstan’s Key Indicators

Kazakhstan: GDP Composition (2017-2019f)Key indicator 2017 2018e 2019f

Growth indicatorsGDP growth, % YoY 4.0 4.1 3.8GDP per capita, USD 8,913 9,114 9,918Agriculture, % YoY 2.9 3.4 3.6Industry, % YoY 7.1 4.1 3.3Mining & quarrying, % YoY 9.3 4.6 1.9Manufacturing, % YoY 5.1 4.0 3.8Construction, % YoY 1.9 4.1 3.7Oil price, USD pb 54.4 69.8* 62^

Monetary policy indicatorsInflation (year-end), % YoY 7.1 5.3 5.0-7.0Credit to the economy, KZT bln end of period 12,705 13,999 15,241Deposit of residents, KZT bln end of period 17,510 18,553 21,080Money supply, KZT bln end of period 19,456 20,813 23,422USDKZT (average) 325.32 344.90 370

Current account balanceExport, USD mln 49,455 61,899 54,112Import, USD mln 32,107 34,509 32,920Trade balance, USD mln 17,348 27,391 21,192Current account balance, USD mln -5,390 925.4 -3,660% of GDP -3.3 0.6 -2.0

Consolidated budgetRevenue, KZT bln 10,919 11,555 12,021% of GDP 20.8 19.8 18.8

Oil revenue, KZT bln 2,888 3,969 3,265Non-oil revenue, KZT bln 8,031 7,587 8,775

Expenditure, KZT bln 13,132 11,287 12,497% of GDP 25.1 19.4 19.5Consolidated budget, KZT bln -2,214 269 -476% of GDP -4.2 0.5 -0.7Non-oil balance, KZT bln -5,102 -3,700 -3,741% of GDP -9.7 -6.4 -5.8

Source: Statistics Committee, Ministry of National Economy, National Bank of Kazakhstan, Bloomberg, Samruk-Kazyna*Brent price average in 2018^market consensus at the time of report writing

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