Factors of attractiveness of the investment climate

in Kazakhstan

JSC “NATIONAL EXPORT & INVESTMENT AGENCY “KAZNEX INVEST”

Ministry of Industry and New Technologies of the Republic of Kazakhstan

Date: May 13, 2013 Place: Stockholm, Sweden

KAZAKHSTAN: YOUR GATEWAY TO 3/4 BRIC OR TO 3 BILLION PEOPLE

KAZAKHSTAN

47

5 5.

4 5.

4 5.

4

The average minimum duration of flights to major centers of economic activity (in hours)

KAZAKHSTAN

Territory: 2.7 mln. sq. km. Population: 16,8 mln

GDP, 2011: $ 188 bill

GDP per capita, 2011: $ 11 356

Major languages

• Kazakh (state language) • Russian (official, business language) • English, Chinese (young generation)

Main ethnic groups: • Kazakhs: 65% • Russian: 25% • Other: 10%

Source: The Agency of Statistics of the Republic of Kazakhstan

INDUSTRY OF KAZAKHSTAN MANY FOREIGN COMPANIESHAVE ALREADY INVESTED IN KAZAKHSTAN

16,4

8,3

30,2

21,0

Mining and oil Manufacturing Exploration Other

FDI FLOWS INTO KAZAKHSTAN HAVE DEFIED GLOBAL ECONOMIC CRISIS

Source: National Bank of the RK UNCTAD Stat

1,3 0,7 1,0 1,7 2,1 1,2 1,9 2,8 4,6 4,1 4,6

8,3 6,6

10,6

18,5 19,8 19,0 19,0 20,8

17,0

0,0

5,0

10,0

15,0

20,0

25,0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 9 m2012

FDI inflows in RK, bill. USD

165.5 bill. USD

75.9 bill. USD

46%

By industry 2009-9m. 2012

By country 2009-9m. 2012

27,1

6,4

5,3

4,5

3,4

2,8

2,6

2,5

2,2

19,1

Netherlands

USA

France

China

UK

Virgin Isles (UK)

Russian Fed.

Canada

Japan

Other countries

1,0

1,3

3,2

5,0

6,8

9,1

13,0

16,6

65,2

93,6

457,5

-6%

63%

7%

14%

28%

22%

34%

30%

23%

21%

28%

Tajikistan

Kyrgyzstan

Moldova

Armenia

Uzbekistan

Azerbaijan

Belarus

Turkmenistan

Ukraine

Kazakhstan

Russian

KAZAKHSTAN HAS ATTRACTED GREATEST FDI PER CAPITA IN CIS

*Compound annual growth rate

Source: UNCTAD Stat

CAGR*

Accumulated FDI in the CIS, 2000-2011 yy., bln. USD

FDI in the CIS countries per capita, 2011 y., USD

142

244

236

892

1359

1443

1628

979

3257

3203

5777

Tajikistan

Uzbekistan

Kyrgyzstan

Moldova

Belarus

Ukraine

Armenia

Azerbaijan

Turkmenistan

Russian

Kazakhstan

INDUSTRY OF KAZAKHSTAN WHY IS KAZAKHSTAN ATTRACTIVE FOR FOREIGN INVESTORS?

Political stability and good investment climate

1 ▪ A high level of trust in political

institutions and the effective allocation of funds (WEF 2012) in comparison with the countries of the CIS.

▪ ▪ Ease of Doing Business (49 on the list of World Bank Doing Business 2013: 10 place in the investor protection and 17 place in the payment of taxes).

2 Regionally attractive fiscal and non-fiscal regime and protection of foreign investment

▪ Attractive corporate tax rate (20%) and low VAT (12%)

▪ Fiscal and non-fiscal incentives for investors, including in SEZs

▪ 48 bilateral agreements on mutual protection of investments (US also)

▪ Main international arbitration instruments ratified

Stable macroeconomic indicators and high growth 3 ▪ GDP growth: 5.5% (IMF 2012) ▪ Low debt / GDP ratio in the world:

15.8% (IMF 2012) ▪ Budget deficit: 2.5% (IMF 2012) ▪ Inflation rate: 6.0% (IMF 2012)

4 Springboard to circa 3 billion potential customers

▪ 3 of the 4 BRIC countries are in 4 hours flight

▪ Customs Union with a population of 170 million and a total GDP of 2 trillion.

▪ Open economy (trade 70% of GDP) ▪ Anticipated entry into the WTO in

2013

2,3

2,4

2,5

2,5

2,8

2,8

2,9

2,9

3

3,1

3,6

3,6

3,8

4

4,7

5,1

5,2

5,5 5,7

127

126

117

115

99

91

87

86

79

74

55

54

47

44

30

24

22

17

11

Czech

Russian

Ukraine

Romania

Croatia

India

Bulgaria

Azerbaijan

Lithuania

Kazakhstan

Turkey

Macedonia

Jordan

Poland

Georgia

Saudi Arabia

Chile

Australia

UAE

HIGH CONFIDENCE IN POLITICAL INSTITUTIONS AND EFFECTIVE MANAGEMENT OF PUBLIC FUNDS

1,6

1,8

2

2,1

2,1

2,2

2,4

2,5

2,5 2,9

3

3,3

3,4

3,4

3,7

4

4

5,6

5,8

139

133

120

115

113

106

90

86

85

65

63

47

45

43

37

29

27

5

3

Czech

Romania

Ukraine

Croatia

Lithuania

India

Poland

Russian

Bulgaria

Macedonia

Georgia

Azerbaijan

Jordan

Turkey

Kazakhstan

Chile

Australia

Saudi Arabia

UAE

The index of trust political institutions Place in the ranking

Place in the ranking Efficiency of the allocation of public funds

144 Extremely low Very high Irrational Highly

1 1

Source: The Global Competitiveness Report 2012-2013

144

185

168

154

141 137

130

112

73 67

58

49

32 15

9

1

0 20 40 60 80 100 120 140 160 180 200

Central African Republic

Afghanistan

Uzbekistan

Tajikistan

Ukraine

Brazil

Russian Federation

Italy

Azerbaijan

Belarus

Kazakhstan

Armenia

Ireland

Georgia

Singapore

DOING BUSINESS IN KAZAKHSTAN IS MUCH EASIER THAN IN MOST EMERGING MARKETS

Source: World Bank Doing Business 2013

Doing Business 2013 Country rank

10

LAW OF THE RK DATED AS 21.07.11 № 469 “ON INVESTMENTS»

Exemption from customs duties on equipment, components, raw materials and spare parts imported for a

project

In-kind state

grants Tax allowances as per Tax code

of the RK (deductions of the value of the preference objects,

and (or) further costs to modernization up to 3 years)

Preferences for projects in priority sectors

Preferences for strategic investment projects *

Land , property tax 0% for up to 7 years Guaranteed state order Industrial subsidies for areas with low

socio-economic development

Corresponds to the List of high-technology products

The volume of investment exceeds 50 million USD OR

10

CRITERIA for investment projects: Corresponds to the List of priority activities

Corresponds to the List of priority activities

INVESTMENT PREFERENCES

SECTOR-SPECIFIC INCENTIVES IN 9 DEDICATED SEZS ACROSS COUNTRY

SEZ “Innovation TechnoPark”

(IT-industry, innovations) SEZ “Ontystik” (textile industry)

SEZ “Khorgos Eastern Gate” (Trade, logistics)

SEZ “Saryarka” (metallurgy)

SEZ “Astana new city” (construction industry)

SEZ “Burabai” (Tourism)

SEZ “Pavlodar” (chemical industry)

SEZ “Petrochemical park” (Oil and gas industry, petrochemicals)

SEZ “Marine Port Aktau”

(logistics, transport)

Aktau

Atyrau

Shymkent

Astana

Karaganda

Almaty

Pavlodar

SEZ “Chemical park Taraz”

(chemical)

Taraz

FISCAL INCENTIVES in SEZs

• 0%Corporate Income Tax until 2020-2025 with possibility for extension

• 0% for land and property tax until 2020-2025 with possibility for extension

• VAT– 0% (for products consumed in SEZ) until 2020-2025 with possibility for extension

• Increase of marginal rate of depreciation for tax on the production of software to 40%

• For SEZ “Innovation technopark” – social tax is 0% for 5 years, under certain conditions

• For SEZ“Innovation technopark”– depreciation rate for software increased to 40 %

NON-FISCAL INCENTIVES

• Provision of free land in SEZ for a period of up to 10 years from registration time as SEZ resident

• Simplified procedure for the recruitment of foreign labor

ATTRACTIVE INVESTMENT INCENTIVES IN SEZS

KAZNEX INVEST:YOUR ONE-STOP-SHOP FOR INVESTING

Providing information about business / invest

projects and analytical information

Assist in the selection of projects of AIID Help in choosing a partner

Assistance in administrative mattersOrganization of meetings

with officials

COMPREHENSIVE ASSISTANCE TO FOREIGN INVESTORS

Assistance in obtaining state support for investors

THANK YOU FOR YOUR ATTENTION! www.invest.gov.kz