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Kazakhstan, an OIC (Organization of the Islamic Conference) member country, with an average GDP growth over the past five years of roughly 10%, has always been the most attractive investment destination in Central Asia.
But when the World Economic Forum, in its annual 2005-2006 ranking of the most competitive nations in the world included Kazakhstan for the first time, introducing it at #61 amongst the 117 countries covered, Kazakhstan’s President, Nursultan Nazarbayev, took particular notice and made it a benchmark to further accelerate the growth and global integration of his nation. |
President Nursultan Nazarbayev's 2006 national strategy has galvanized an already booming economy
(Photo: Akorda.kz)
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This included strengthening economic bonds with the Muslim world--presenting a wide array of investment and joint venture opportunities.
In his annual address to the people of Kazakhstan in March 2006, economic reform focused President Nazarbayev, set a vision and detailed strategy to make Kazakhstan one of the 50 Most Competitive Countries of the World within the next ten years.
The speech has not only galvanized all sections of society in Kazakhstan, but has also highlighted the tremendous opportunities many in the Muslim world can leverage as a place for expansion or investment into Central Asian markets. "Amongst 50 Most Competitive Countries" -
An Achievable Vision?
If all goes according to plan, Kazakhstan will achieve 350 percent growth by 2015 over the 2000 GDP level. With abundant mineral, oil and gas resources (the world's second largest gas field is in Kazakhstan) as its basis, and the dramatic recent reforms including strong a diversification drive and foreign investor confidence measures, the above economic targets should not be considered unrealistic, experts say.
Reforms have started to show concrete signs of progress. Last year Kazakhmys, a Kazakh company and the world's largest copper producer was listed on the London Stock Exchange as a sure sign of global market confidence. Its banking system is already considered the best amongst the whole of the former Soviet Republics.
Star amongst its banking sectors is the privately owned Kazkommertsbank (KKB) which has recently been recognized as the best Kazakhstan bank eight years in a row by international magazine, Global Finance. It was also rated as the most reputable company in Kazakhstan by E&Y Kazkahstan. The role of this maturing private sector is another feather in the cap of an open and business friendly environment.
Kazkommertsbank is the largest (by assets) private, full-service bank in Kazakhstan, providing corporate banking, retail banking and other financial services. It is the only sizeable private initiative in the financial sector that did not emerge from the 'soviet era.'
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In his address to the nation, President Nazarbayev laid out Kazakhstan’s strategy to integrate into the world economy by making WTO accession a key driver. As reported by Interfax, Nazarbayev said WTO accession would open "vast opportunities for strengthening Kazakhstan’s competitiveness." Foreign Minister Kasymzhomart Tokayev stated in mid March that Kazakhstan aimed to join the group in 2007. President Nazarbayev also signaled the belief that fostering strong regional cooperation is the key to the realization of the country’s ambitious goals. While he laid out specific focus on the relationship with Russia and China amongst other countries, he also addressed building stronger ties with the Muslim world.
“Kazakhstan’s active participation in the structure of the international cooperation and cultural exchange with the Islamic states is quite natural. The country expands mutual benefit and mutual enriching ties with the majority of Islamic countries as well," President Nazarbayev said.
Similarly it has set out to become a leader amongst the Central Asian states including making serious efforts in improving Kazakhstan-Uzbekistan ties. This was made evident during President's recent trip to Uzbekistan where tangible steps were taken to improve trade ties. Promising Sectors for Investment
Kazakhstan's continuous moves to reduce its reliance on the energy sector to drive growth are opening up tremendous investment opportunities.
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During his speech, President Nazarbayev in particular identified Joint Venture opportunities in Oil & Gas, transport, chemical, agro-industrial and machinery engineering sectors. He also pointed to Kazakhstan's desire to become a regional IT center while seeking to build biotechnological centers with international participation. |
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Promising Investment Sectors |
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Oil & Gas |
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Transportation |
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Chemical |
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Agro-Industrial |
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Information Technology |
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Medical Supplies |
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Machinery Engineering |
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Retail |
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Renat Bekbolatov, a Kazakhstan native working as an investment banker in the US and seeking to connect Muslim investors to opportunities in Kazakhstan, identifies many opportunities.
"Depending on the scale of the investment, investors can choose different areas. For example, if they want to invest big, then energy and mineral sectors look attractive. For smaller capital, they can enter areas such as: information technology, medical supplies, retail stores, entertainment, heavy machinery manufacturing, and for some creative investors willing to invest more than just cash, areas like tourism and jewelry looks potentially promising. There are plenty of investment opportunities in Kazakhstan, and the growth of business is set to continue." says Mr. Bekbolatov.
A Nation Responds
The reaction to the Presidential address has been across the board--officials of the Government, political analysts, business community, academia of the higher educational institutions, and heads on mass media are participating and organizing events to discuss the vision and measures needed. In a recent event in Almaty, deputy Head of Presidential Administration Maulen Ashimbayev stressed, "Currently it is crucial to join efforts of all governmental authorities and civil society for effective realization of the Message."
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President Nazarbayev (left) meeting with citizens.
(Photo: Akorda.kz)
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A first ever international forum on quality is planned for later this year in Almaty. The slogan of the event is aptly, “Quality and Perfection represent successive way into the 50 most competitive countries of world.” Another international conference tied to the presidential vision concluded mid march in Astana titled “State, business and society of Kazakhstan: domain for innovations” where the Vice Premier Karim Massimov, international experts, public organizations, heads of national companies, and large business corporations participated. The conference was aimed at discussing the problems and prospects for forming efficient system of social partnership in Kazakhstan. In addition, Almaty, the largest city, is already vying to be a major financial center in the region and even working for the right to hold Winter Olympic Games. Director of Municipal Department of Business and Industry Yerbol Shormanov, stated in an Interfax interview that, "In the current year, 23 innovative projects to the amount of about KZT 42 billion will be implemented in Almaty. Production will be competitive, with high added value and oriented for export. It absolutely accords with the President’s tasks." One such project being implemented is the International Center of Technologies Transfer in the Almaty Technological Park (Technopark ).
Strengthening co-operation with Muslim world
When President Nazarbayev spoke of strategy towards the Muslim world, he termed the relationship as only 'natural.' Today there are concrete signs towards strong economic engagement. Kairat Kudaiberghenov, Vice Foreign Minister of Kazakhstan pointed out in a recent briefing in Astana that "in early May there will be a summit of the Economic Co-operation Organization (ECO) that has Muslim countries as its members in Baku and a high ranking delegation from Kazakhstan will participate in it (as reported by Kazakhstan Today and Gazeta.kz)."
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"Kazakhstan’s active participation in the structure of international cooperation and cultural exchange with the Islamic states is quite natural"
-- President Nazarbayev
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The ECO which is comprised of Pakistan, Iran, Turkey, Afghanistan and the six Central Asian Republics (Kazakhstan, Kyrgyz Republic, Turkmenistan, Tajikistan, Azerbaijan and Uzbekistan), has so far focused on infrastructure projects such as railroad, road lines and other infrastructure projects to facilitate trade investments.
He also added that "a number of bilateral meetings between Kazakhstan and the Islamic world including Arab states are planned. During this year the President is going to visit some of these states and we are waiting for high standing delegations from these countries to visit us."
On programs relating to the business to business interaction, an example is Pakistani investors being wooed to setup base in Special Economic Zone (SEZ) “ Outustik” which was established in July 2005 as one of the initial steps towards creation of cotton-textile cluster in the South Kazakhstan oblast (region) (SKO). Gali Shaimakov, commercial counselor, embassy of Kazakhstan in Pakistan has been meeting with Pakistani textile business associations for that matter.
He said more than 15 spinning, weaving and sewing units are expected to be setup in the SEZ. He said the SEZ “ Outustik ” offers favorable conditions for potential investors also given that Kazakhstan has high demand for cotton yarn. Textile companies working with the SEZ would be exempted from corporate income tax, land tax and property tax and partly from value added tax. He said certain simplification of the customs procedures was also envisaged for the investors.
Further engagement with Pakistan was explored on April 6th, when the Kazakhstani Institute of Strategic Studies (KISS) held an international round table on "Relationship between Kazakhstan and Pakistan: current state and perspectives" in which it was noted that the current annual volume of trade between the two countries of $10 million USD could quickly be raised to $100 million USD per annum. In the roundtable Pakistan's geographic affinity was noted by the fact that Almaty is closer to Islamabad geographically than to the capital, Astana.
Turkey as a base
Amongst the OIC member countries, Turkey has always maintained the strongest relations with the Central Asian Republics, including Kazakhstan. Turkish companies have been investing in CA for years due to strong geographic, cultural and even language affinities with investments focused on sectors such as food, beverages, oil industries, banking, retailing and tourism in Kazakhstan. This relationship is one, many others from the Muslim world can look to leverage.
In early March, Dubai Bank inked an agreement with Daruma Corporate Finance of Turkey to develop and market Shari’ah compliant corporate finance and merchant banking services which would also be marketed to Turkey's Central Asian neighbors including Kazakhstan. This partnership is reflection of Turkey’s strength as a partner in helping launch many businesses into the Central Asian markets. In 2000, the trade volume reported between Kazakhstan and Turkey was $465 million which was highest amongst Turkey's trade with the CA countries. Alarko Holding, a Turkish conglomerate is one of the biggest foreign infrastructure contractors in Kazakhstan Republic. They also Chair the Turkish - Kazakh Business Council run under the auspices of DEIK (Foreign Economic Relations Board) a non-profit private sector organization. The Council serves to remove trade bottlenecks amongst the two countries as well as disseminate information on business opportunities in Kazakh market.
Even with such strong relations, the feeling amongst the Turkish business community seems to be that much more is desired. Yakup Kocaman, a Turkish business journalist comments that, "Eventhough the Central Asian countries have got very good relationship with Turkey, many here say that Turkey has not realized the full potential of CA Republic opportunities." Perhaps, partnering with other Muslim world investors to enter the Kazkahstan market is just the impetus that is needed to boost the trade relations here. |
