Investment policy in the Republic of Kazakhstan
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This work consists of an introduction, three chapters, conclusions, list of literature used. The first chapter reveals the need, essence also include the nature and structure of the business plan. The second chapter examines the construction of a business plan on a concrete example. In the third chapter examines the risks associated with the implementation of the business plan and their prevention. I decided to write a term paper on «Investment policy in the Republic of Kazakhstan», because I believe that the investment plays a crucial role as the macro -and at the micro level. In fact, they define the future of the country as a whole, separate subject of management and are the driving force in the development economy. And the attraction of foreign investments in the republic’s economy and their development are instrumental in improving the productive capacity of its economy, serve as an important tool for the transfer of technical and managerial skills of — Abroad.
Entrepreneurial, investment and the economy in whole is largely dependent on government policy. His State actions can significantly slow down or speed up these processes.
Market economy, despite its many positive features, not able automatically adjusts the entrepreneurial and investment activities, as well as all the economic and social processes in the interest society and every citizen. It does not provide social equitable distribution of income does not guarantee the right to work not aims at protecting the environment and supports unprotected sectors society.
Private business is not interested to invest in such industries and such projects that do not generate high enough profits, but for society and States are simply vital (the coal industry, railways, roads, agriculture, etc.). Market economy does not address many other pressing problems. And all this should take care of the state.
Is the prerogative of the State and ensuring the proper order in country and its national security, which in turn is the basis for the development of investment activity.
Thus, the economy of any country cannot develop normally; and investment will not invest if the state did not provide appropriate conditions for this.
State to perform its functions of economic regulation uses both economic (indirect) and administrative (direct) methods of influencing the investment and the economy by publications and adjustment of relevant laws and regulations, as well as by a certain economic, in number and the investment policy.
Investment activity largely depends on the completeness and degree of perfection of normative — legislative framework.
In recent times the investment climate in Kazakhstan changed for the better. This was facilitated by the efforts of the country to improve the business environment, reforms in the economy, upgrade legislation.
At the end of 1999 the Republic of Kazakhstan has signed bilateral agreements with more than 30 countries for the promotion and protection of investments; State has more than 1000 enterprises with foreign participation and more 100 enterprises transferred to the Government in the management of foreign investors.
Today, only the total amount of foreign direct investments Kazakhstan approximately 6.8 billion U.S. dollars. And according to the press --Service of the Ministry of Foreign Affairs of the Republic of Kazakhstan, the volume of a U.S. investment is 1.9 billion U.S. dollars, which is 28% of the total direct investment and is the largest in Central Asian region. In the Republic of more than 300 to a Wand x s t a n a to — a m e r i k a n s k and agricultural enterprises and Mission of 100 American companies. And the end of 2000
American Chamber of Commerce has attracted at least another 100 companies. So way through new investors, total investments by U.S. economy in the Republic of Kazakhstan should exceed this year the figure 4 billion U.S. dollars.
It must be emphasized that the main flow of foreign direct investment in total expression is involved in oil and gas complex. For past four years in this region invested more than half of all foreign capital. With higher levels of investment, invested in metallurgical complex: from 0.2 million in 1993 to 453million in 1999. Grow as investments in other sectors economy, the volume of which during this period increased by 1,5 times. All these figures talk about that today in Kazakhstan can not only lead entrepreneurial activity, but also adequately protect proprietary interests of the entrepreneur.
investment policy kazakhstan
Chapter 1. INVETMENT, THEIR ECONOMIC SUBSTANCE, CLASSIFICATION AND STRUCTURE
1.1 Investments as an economic category, and their role in the development of macro-and microeconomics
Investments — a relatively new term for our economy. Within centralized planning system was used only one concept
«Capital expenditure», which refers to all costs reproduction of fixed assets, including the cost to repair them.
In the Act of December 27, 1994 number 266 with amendments is defined as investments: Investments — all property and intellectual property invested in facilities entrepreneurial activities to generate income, including:
— movable and immovable property and rights, the right retention and other than goods imported and intended for implementation without processing;
— shares and other forms of participation in business organizations;
— bonds and other debt obligations;
— demands cash, goods, services and any other performance entreaties relating to investment;
— right to the results of intellectual activity, including copyright rights, patents, trademarks, industrial designs, technological processes, know — how, normative — technical, architectural, engineering and design project documentation;
— any right to engage in activities based on the license or another form provided by a public authority «.
Investing — activities related to the implementation of investment Foreign investment in the facilities business in order to profit (income).
For investment in a broad sense refers to cash property and intellectual property of the State, legal and individuals directed to the creation of new enterprises, expansion, reconstruction and modernization of existing, acquisition real estate, stocks, bonds and other securities and assets for profit and (or) a positive effect.
Investments — is a broader concept than capital investments.
Investments divided into portfolio and real.
Portfolio (financial) investments — investments in stocks, bonds, other securities, the assets of other enterprises.
Real investments — investments in the creation of new, reconstruction and modernization of existing enterprises. In this case, enterprise — investor, investing, increasing its manufactured capital — the basic production funds and the necessary for their functioning working capital.
In the implementation of portfolio investment, the investor increases its financial capital, receiving dividends — income securities.
Government of the Republic of Kazakhstan (RK) adopted a law on state support for direct investment, which is based on the Constitution of the Republic of Kazakhstan and consists of rules and regulations — legal acts.
State support of direct investments is:
. in legislative guarantees of investment activity;
. the establishment of systems and incentives and preferences;
. in the presence of a single state body authorized to represent the Republic of Kazakhstan to investors;
. to provide guarantees to cover political and regulatory risks in accordance with the treaties concluded by the Government of Kazakhstan with international organizations and relevant regulatory acts of the Republic of Kazakhstan.
Purpose of state support of direct investment is the creation of favorable investment climate for accelerated development production of goods, works and services in priority sectors economy, a list which is approved by the President of Kazakhstan.
In achieving the goal of Kazakhstan has the following tasks:
1. The introduction of new technologies, advanced technology and know — how.
2. Saturation of the domestic market with high quality goods and services.
3. State support and encourage domestic producers.
4. The development of export-oriented and import-substituting industries.
5. Rational and comprehensive use of raw materials base of Kazakhstan.
6. The introduction of modern methods of management and marketing.
7. Creation of new jobs.
8. The introduction of continuous training of local personnel, improving their skills.
9. Ensuring the intensification of production.
10. Improving the environment.
State regulation of investment activities positions in production is in the form of capital investment and maintained by state authorities of Kazakhstan, specifically — the cost of construction — erection work for buildings and structures; acquisition, installation, adjustment of machines and equipment design --survey work, the content of the Directorate under construction company; training and retraining, the costs of allocation and resettlement in connection with the construction and other in statistics and economic analysis of real investment is also called the Capital-. Capital-investment include following elements:
. capital investment;
. cost of major repairs;
. investment in the acquisition of land and objects of nature;
. investments in intangible assets (patents, licenses, software research — research and development — design work, etc.);
. investment in replenishment of inventories.
Main place in the structure of Capital-occupied investment in fixed capital in the amount of which include the cost of new construction, reconstruction, expansion and technical upgrading existing industrial, agricultural, transport, trade another enterprises, the cost of housing and cultural — Domestic construction.
Investments as an economic category serves several important functions, without which there is normal development of the economy of any state.
Investments at the macro level are the basis of:
. to implement the policy of expanded reproduction;
. to accelerate the NTP, improve quality and competitiveness of domestic products;
. for the restructuring of social production and the balanced development of all sectors of the economy;
. to create the necessary raw materials industries;
. for civil construction, development, health, culture, higher and secondary schools, as well as to address other social problems;
. to alleviate or solve the problem of unemployment;
. for the protection of the environment;
. for the conversion of the military — industrial complex;
. to ensure the defense capability of state and solving many other problems.
For the economy of Kazakhstan, which has long been in a state economic crisis, investments are needed primarily for its stabilization, revitalization and expansion. Investments in production, new technologies help to survive in a tough competition (both domestic and on the external market), provide an opportunity for more flexible regulation of prices their products, etc.
A macroeconomic scale, today’s welfare is in largely the result of yesterday’s investment, in turn, pave the future growth of labor productivity and more High welfare. We are constantly «at a crossroads — between consumption today and tomorrow. The greater portion of the Today we have other savings and invest, the more we will have opportunities consume tomorrow. The contrary, the more resources we use today consumption, the less we will have a chance at a higher level needs of tomorrow.
Investment plays a crucial role at the micro level. This level, they are especially needed to achieve the following objectives:
. expansion and development of production;
. avoid excessive mental and physical depreciation of fixed assets;
. raising the technical level of production;
. improve the quality and competitiveness of a particular company;
. environmental activities;
. acquisition of securities and invest in assets of other enterprises.
Ultimately, they are necessary to ensure normal operation of the business in the future, stable financial condition and profit maximization.
Thus, investment is an important economic category and play an important role both at macro and micro levels, primarily for simple and expanded reproduction, structural change, profit maximization, and on this basis, the solution of many social problems.
But — for the general economic instability, high inflation, high interest rates on loans that exceed the level of profitability enterprises in recent years, the volume of capital investments and capital construction declined sharply, that does not help, but rather worsened the economic situation of the republic.
State investment in the country is characterized by dynamics following parameters:
. total investment;
. share of investment in gross domestic product (GDP);
. proportion of real investment in total investment;
. total value of real investment;
. proportion of real investment in the capital and other
Indirectly, but rather an objective state of investment characterize the growth of the main macroeconomic indicators:
1) national income;
2) GDP and GNP;
3) the volume of industrial production; < p> 4) release of selected key industrial products;
5) of agricultural production;
6) productivity of labor;
Objectivity of these indicators in the evaluation of investment due to the fact that their growth is inconceivable without investment. These indicators to characterize the efficiency investment. If the growth rates of these indicators are ahead of growth investment, it is a clear sign of efficiency investment and vice versa.
level of investment has a significant impact on the volume national income of society; then it depend on the dynamics of many in the national economy are also a source of investment and savings. But about Len is that the savings made by some economic agents, and investments may be completely different group of people or economic subjects. The savings of the population at large are a source of investments (e.g., savings of the worker, teacher, doctor, police and etc.). But these individuals do not carry out capital formation or investment associated with the real growth of Capital Goods Company. Course source of investment and accumulation are functioning in society industrial, agricultural and other enterprises. Here
«Thrifty» and «investor» coincide. However, the role of wage savings Labor is not the same and entrepreneurs, is very high, and differing processes of saving and investing all of these differences can lead the economy in the state, deviating from equilibrium process of investment depends on such important factors as the expected profit margin or return on investment expected. If this profitability, according to an investor, is too low, then the investment will not implemented.
In addition, an investor in decision-making always takes into account alternative investment opportunities and there will be a critical level of interest rates. The investor can invest in new plant construction or factory (any company), and may place their money and resources bank. If the interest rate is higher than expected rate of return, then investments will not be implemented, and, conversely, if the rate of interest below expected rate of return, employers will implement projects investment.
Inflation most significant influence on investment activity which, in turn, depends on the state of the economy — with the stabilization and reviving the economy — it is reduced. It should be borne in mind that with process of inflation is closely related to the rate of bank credit known that the demand curve for investment depends on the rate of bank cent © and the expected rate of net profit (H) of sub investment.
The figure, the higher bank interest rate, the lower demand for investment, a similar relationship exists between the demand for investment and the expected rate of net profit. Advantageous to invest in If the rate of net profit exceeds the rate of bank interstice H> C «. Conversely, if the interest rate exceeds the expected rate net profit, i.e. Cn> H, then in this case, the enterprise investment unfavorable.
Known that there is a nominal and real interest rate.
Real differs from the nominal rate to inflation, i.e. ,
Cp = Cn — Ui '
Where to Wed — the real rate of bank cent;
Cn — nominal interest rate on bank cent;
Vu — inflation.
Should be emphasized that it is the real interest rate, rather than nominal plays a significant role in making investment decisions.
In terms of inflation, especially hyperinflation, when the bank interest for the credit is very high, investments for the enterprise will be profitable only in If the expected rate of return will be higher than that of bank interest, but such projects to find the company very difficult This suggests concluded that hyperinflation is the most significant obstacle to recovery investment activities.
Financial stabilization, as international experience shows, there comes when the annual price increase does not exceed 40%, and the average — 2,8%.
If it is higher investment in production sharply reduced as the growth economy and living standard.
1.2 Classification of investments and their structure
For accounting, analysis and improve the effectiveness of their investments should be Science — a legitimate classification of both the macro and micro levels.
Sophisticated, grounded in scientific terms the classification of investments not only allows them to correctly take into account, but also to analyze the level of their Use on all sides and on this basis to obtain an objective information to develop and implement effective investment policy.
In the tenure of a planned economy and in practice the most common received a classification of capital expenditure on the following features:
On the grounds earmarked for future facilities — this is their distribution sectors of the economy — the branch structure, which in turn forms two divisions — investment in production facilities purpose and objects of non-production purposes.
According to the forms of reproduction of fixed assets — for new construction, expansion and modernization of existing enterprises, and technical.
Source of funding — centralized and decentralized.
Toward Use — in manufacturing and nonmanufacturing.
On the objects of their applications — Investments in the property (tangible investment) — Investment in buildings, facilities, equipment, supplies Materials, Financial investment (purchase of shares, bonds, and other securities). Intangible investments (investments in training, research and development, advertising).
In foreign literature, a classification of portfolio investments
On the basis of their influence and control in the company, whose shares are purchased investor. Based on this criterion all portfolio investments classified in:
— significant influence (the acquisition of more than 20% but less than 50%shares entitled to vote;
— ensuring control (ownership of an investor for more than 50% of the shares with the right vote);
— do not allow to control and no significant influence (ownership of less than 20% of shares with voting rights);
— do not allow to establish control, but significant influence (possession of more than 20% but less than 50% of shares with voting rights);
— ensuring control (possession of more than 20% but less than 50% of shares parent company and 100% of shares in a subsidiary.
This classification is important for the formation of the optimal structure portfolio investment in the company.
Most comprehensive classification of investments is disclosed in the
NA Blanca, in which all investments are classified as follows attributes: Object attachment, the nature of participation in investment, investment period, ownership of investment resources, regional basis.
1.3 Signs of classification of investments
In the scientific literature and other classifications of investments. All These classifications have the right to life in practical terms, but especially in science, because they allow a more detailed report investment and more in-depth analysis to improve use. But in modern conditions of these classifications is clearly enough.
At the enterprise level is essential following classification investment. The advantage of this classification before the earlier review is that it gives a real idea about that, for what purposes the company can allocate their investments. In fact, this classification describes the portfolio company.
Optimization of the portfolio to minimize risk and obtain maximum economic benefit is one of the major problems in the enterprise.
Efficiency investments is largely dependent their structure. Under the structure of investment refers to the composition of species uses and their share in total investment.
Distinguished public and private investment structures.
The general structure of investments can be attributed to the distribution of real and portfolio (Capital-and financial). The total investment Capital-account for the largest share of investments. The total investment share of Capital-was 81%, and financial-only 19%. Some private entities include the following types of structures of capital investment: technology, reproductive, sect oral and territorial.
Under the technological structure — refers to part of the cost of construction any object on the types of costs and their share in the total estimated costive shows what percentage of capital investments in their total value directed to the construction and installation work (SMR) for the purchase of machinery equipment and their installation, the design and survey and other costs.
The technological structure of capital investments has a very significant impact on the effectiveness of their use. Improvement of the structures to increase the share of machinery and equipment at an estimated cost of project to the optimum level. In fact, the technological structure capital investment generates the ratio between active and passive parts of the fixed assets of the future enterprise.
Increase in the share of machinery and equipment, i.e. active fixed productive assets of the future business, contributes to its production capacity and, consequently, reduce capital investment per unit of output. Economic efficiency is achieved at the expense increasing the level of mechanization and automation of labor and reduces the conditional fixed cost per unit of output. Analysis of the technological structure capital investment is important both in scientific and practical terms.
Reproduction structure — also has a significant impact ineffectiveness of their use.
Under the reproductive structure of capital investments are understood to distribution and the ratio of the total estimated cost of the forms reproduction of fixed assets. You can determine what percentage of capital investments in their total value is directed to: new construction, reconstruction and technical re -production. Theory and practice shows that the reconstruction and technical re-equipment of production is much more profitable than new construction, for many reasons:
In — the first shortening the duration of the commissioning of additional capacity;
In — the second greatly reduces the specific capital investments;
Dynamics of reproductive structures of real investment in capital may show certain changes or trends in positive and in negative terms. The negative aspect is that that increasing the share of real investment in new construction automatically may lead to a reduction in their share, directed at the expansion reconstruction and technical re-equipment of production, which may adversely affect the technical level of production and efficiency investments, and hence the whole economy.
Positive aspect of this same trend is seen in the fact that for the analyzed period, for example, rather turbulent process a small enterprises and it is through this increased share of investment allocated for new construction. Creating a small business in the ROK and increase its role in the economy are necessary and progressive process.
Important for the republic’s economy has also allocation of real investment by sector of Kazakhstan, as it from this distribution depends largely on its future.
Cost-effectiveness of investments depends essentially inspectoral and territorial (regional) of their structure.
Under the industrial structure — refers to the distribution and the ratio of industries and the economy as a whole. Its developments to ensure proportionality and a more rapid development of those industries, which provide the acceleration of STP throughout the national economy of Kazakhstan.
From planning the sect oral structure of investments depends very much, especially the balance in the development of all sectors optimality of its industrial structure, accelerating scientific and technical progress and effectiveness of the entire economy of the republic.
The state with the help of such budgetary and other instruments can significantly affect the trend in the sectorial structure of investment progressive direction.
Important for the effectiveness of investments in the economy has a structure investment funding and ownership.
Under the structure of investment by ownership refers to distribution and the ratio of ownership in their total amount, i.e. to which they belong: the state, municipalities, private legal or natural persons, or to a mixed form of ownership.
It is believed that increasing the share of private investment in the total amount of positively affect the level of their use, and hence on republic’s economy.
Under the structure of investments by source of financing respectively refers to their distribution and correlation in the context of sources funding. Improvement of the structure of investment is increasing proportion of extra budgetary resources to the optimum level. Based dynamic changes from year to year can be present and analyze those changes that have occurred under the influence of such factors as a negative and in positive ways. (For example, an increasingly important role as a source funding began to play a depreciation).
Efficiency investments in the company, its financial provision is also largely depending on their structure on enterprise. Under the general structure of investment in the company understood ratio between real and portfolio investment in their total amount.
Its development is to get the maximum benefit as from portfolio and real investment. This means that the proportion investment in the most effective projects should strive to the maximum. In current conditions essential for enterprises is the structure real, and the structure of portfolio investment. Under the structure Portfolio investment refers to their distribution and ratio of species securities purchased by the enterprise, as well as investments in assets other enterprises.
At the moment, when the share of public investment dropped sharply, and proportion of investment enterprises in their total value increases, the total efficiency investments increasingly depends on the effectiveness of their use directly in the enterprise and, in fact, of the total structure of investment in the company.
Summarizing all the above, we can conclude — the analysis of the structure investments in various fields has the scientific and practical importance.
The practical significance of this analysis is that it allows determine the trend of changes in investment patterns and on this basis develop a more effective and efficient investment policy.
The theoretical significance of analyzing the structure of investment is that on the basis of this analysis identifies new factors not previously known, affect investment and efficiency investment, which is also very important for the development of investment policy.
Chapter 2. INVESTMENT POLICY RK
2.1 Investment activity in the Republic of Kazakhstan
In the Republic of Kazakhstan’s transition to market relations simultaneously created and normative — legislative framework in investment.
February 28, 2010 75 — 1 SAM left the Law «On State Support direct investment «, which regulated the relations arising in process support for direct investments in Kazakhstan, which designates the only state agency authorized to government support and represent the Republic of Kazakhstan — «Agency of RK Investments, whose chairman is appointed and dismissed by office only by the Government of Kazakhstan.
Also April 5, 2010 Presidential Decree 3444 «On Approval list of priority sectors for attracting direct domestic and foreign investment «was defined list of the most priority and most important industries for investment until 2000.
In particular areas such as:
1. The industrial infrastructure.
3. Objects city Astana
4. Housing, social facilities and tourism.
Presidential Decree of 6 March 2010 number 349 were approved rules granting privileges and preferences in investment activities.
But foreign entrepreneurs were dissatisfied with the incompleteness and instability legal framework of economic activity, which operated the system accounting and reporting, the high level of taxation (imperfection of the tax system in Kazakhstan) and its volatility, high cost credit, official corruption and arbitrariness of local authorities, crime in economy, lack of security guarantees and the inadequacy of accounting international accounting standards. All this has played a large and positive role.
Since accounting — is an international record business, it should primarily improve and lead to international model, an incumbent until 2010, the ROK did not match this.
First and important step in reforming the accounting system was abolished the old position and the Decree of the President having the force of the Act, 26December 1995 number 2732 introduced a new Regulation on Accounting and reporting from 1 January 1996, which governs the system accounting and financial reporting. In addition the National Commission on accounting was transformed into the Department of Accounting and audit of the Ministry of Finance of the Republic of Kazakhstan. Was adopted and introduced from 1 January 1997, the new General Plan accounts economically financial activities based on standards developed by him and
Methodical instructions to them — all this is allowed to bring the system accounting to the international level.
Next step was improving the tax system, because all taxes are ultimately reflected in the financial result — net profits remaining at the disposal of the enterprise and which is one of the sources for investment.
In Kazakhstan adopted a new tax code, which is developed in assessment taking into account the best achievements in this field as in our Republic and abroad, which will undoubtedly improve the legal framework taxation.
The Law on Taxes and other obligatory payments to the budget «? 2235 of 24April 1995, provided for substantially the same tax rates for residents and for non-residents and other investors.
At improving the investment activity also influences the level of development Small and medium-sized businesses in the country. as the economy of any state cannot function properly and grow without optimal combination of large, medium and small businesses, with small business is playing an increasing role in the economy of the republic. So it taken a number of resolutions aimed at the development, improvement and protection Small and medium business (to support small business.
2.2 Investment Policy in Kazakhstan: Trends and Priorities
Kazakhstan is a country with a dynamically growing economy; therefore, the GDP growth should be accompanied by a high rate of fixed capital savings.
The financial crisis and economic slowdown have adversely affected the global economy, and Kazakhstan was not an exception. Despite this, business activity here is rapidly recovering. According to preliminary estimates, in Q2−2009 Kazakhstan’s GDP added more than 3 percent as compared to the previous quarter. In order to secure both the macroeconomic and financial stability, the Government has enforced and implements the
Plan for economic stabilization. Systemic measures are in place to stimulate the aggregate
Demand. New Tax and Budget Codes have been revised and enacted. Furthermore, the legal basis to introduce instruments of Islamic finance and investment is being created. Efforts to attract the resources of international financial institutions to fund important investment projects are at the final stage. In the conditions of the crisis, from late 2008, the Kazakh economy suffered from a short-term contraction in the investment activity. However, by March 2009, the negative trend was successfully reversed: the investment growth rate made 102. 2% y-o-y. In April 2009, the rate reached the highest level of 136. 9%, and in June it went down to 107. 3%.
The important contribution to this positive trend was made by our partners — foreign investors, who perceive the investment attractiveness of Kazakhstan as high. This year, foreign sources financed as much as 45 percent of the total fixed capital investments, and the amount of these investments increased 2.4 times. Kazakhstan managed to attract unsecured loans from its strategic partners and investors — China and Russia. Negotiations on receiving
Funding from Arab countries to finance formidable investment projects are on the way.
The investment growth is complemented by the adequate improvement in the quality of investments. For example, the fixed capital investment structure is characterised by the growing share of investment in machinery, equipment, appliances and other capital works. From January to April 2009, such investments grew more than 1.7 times.
Investment attractiveness of industries The analysis of the structure of foreign investments in Kazakhstan shows that the most attractive sectors are as follows:
* financial activities (monetary intermediation) — 32. 2% of total foreign investment (both direct and portfolio);
* geological survey and search -23. 6%;
* crude oil and gas extraction -12. 9%;
* manufacturing, civil engineering, retail trade — 5% each
The high rate of return remains the key determinant of the industry selection by foreign investors. This is proved by the data on enterprises' financial and business activities the highest rates are recorded in the mining industry (29. 2%), in transport and communications (15. 3%), civil engineering (12. 5%); the average rate of return in Kazakhstan is 13. 8%. An important factor of investment attractiveness is the state investment policy that serves as a sign of favorable investment climate for the investors, both existing and potential. According to the new Tax Code, the corporate income tax will be lowered from 30% to 20% in 2009, to 17. 5% in 2010 and to 15% in 2011. Starting from 2009 onwards, the value added tax (VAT) is reduced from 13% to 12%. The tax breaks are applied for companies investing in all economic sectors. The rate of the natural resources extraction tax, imposed on crude oil that is delivered domestically is two times lower than on exported oil. This is done to stabilize internal prices on fuel.
At present, there is a favorable tax regime for manufacturers (legal persons), which implies a 70% tax cut. Also, there are considerable tax breaks for investors in the agricultural sector, including the 70% cut in the VAT for companies processing agricultural products.
This provides for additional stimuli for investors. Potentially, the agricultural sector may extend its competitive advantages, with investments becoming the growth driver for the development of foodstuff and consumer goods industries.
Within the first six months of 2009, the total of USD 8.9 billion was invested in fixed capital, including USD 4 billion (more than 45%) of foreign investments. Thus, the Inflow of foreign capital to Kazakhstan remains high. It is expected that China is to provide USD10 billion for the completion of several investment projects. The United Arab Emirates will invest in the establishment of the Islamic Bank and the construction of the «Abu-Dhabi Plaza» complex in Astana. South Korea is also to invest USD3 billion in the construction of the Kazakh power plant.
2.3 Investment Policy priorities
Taking into consideration the crisis conditions, the top priority for the public investment and public- private partnerships is infrastructure projects. The
Roadmap of the efficient allocation of production capacities in Kazakhstan till 2020 will allow the Government in cooperation with private business to work out feasible investment solutions.
Private sector projects will be focused on the development of infrastructure, full utilization of resources and expansion of the country’s economic potential. In January 2010, the Government will start the implementation of the 5-year Industrial-Innovation Development Plan, which should drive economic diversification on the basis of innovative industrial development and stimulate the post-crisis breakthrough of the Kazakh economy. The priority sectors within the Plan are as follows: the agricultural complex, civil engineering and construction materials manufacturing, oil refinery, oil and gas infrastructure, metallurgy and production of finished metal products, chemicals, pharmaceuticals, and defense industry, power generation, transport and telecommunications infrastructure. Implementation of the Plan will be supervised by the State authorities. In 2009−2011, investments from the state budget will increase by more than USD 10 billion; additional USD10 billion will be provided from the National Fund. Funding of the industrialization process may be in the form of either private capital participation in priority projects with free niches for profitable investment, or as a public-private partnership. The examples of such projects include:
implementation of pilot network projects in agriculture; construction of a bitumen plant in Mangystau region; production of metallurgical silicon in Karaganda region;
construction of the Beyneu-Bozoy- Akbulak gas-main pipeline; reconstruction and modernization of the Atyrau refinery, chemical-gas complex in Atyrau region; ferroalloys modernisation in Zhambyl region; potassium fertilizers in Aktobe region; Moynak hydro-power plant construction. Selection of priority investment directions for the State support is
based on a number of certain criteria. These include scientific and technical novelty; economic feasibility; impact on other sectors of economy; social efficiency.
The state will complete market forces with a number of regulatory and support measures aimed at reducing uncertainty and providing stability of the market situation.
Furthermore, the business will be provided with guidelines for efficient industrial development, stimuli for re-distribution of capital into acquisition of new technologies and markets, as well as with information support.
Chapter 3. Foreign direct investments in the economy of Kazakhstan
3.1 Foreign investment by industry
Profitability of direct investments is obvious. Inflows of foreign direct investment in Kazakhstan is carried out through joint ventures, subsidiaries, privatization of state enterprises with participation of foreign capital, the transfer of the management of foreign firms to large industrial enterprises and investment banking sector. The main form of direct investments into the country is joint ventures (JV), to a lesser extent — with 100% foreign capital — subsidiaries. Most of those were organized jointly with Turkey, Russia, China, Germany, USA, Italy, South Korea, Britain and other countries.
January 1, 2003 Kazakhstan had 5,300 enterprises with foreign capital (as of 1 January 2002 — 3995), including in 2004 with the participation of foreign investors from 3296 enterprises wholly owned by foreign investors from 112 countries, with a total registered capital in the amount of 197.6 billion tenge. The greatest number of existing companies from the countries of the CIS created with companies of the Russian Federation — 1042 Enterprise, Kyrgyzstan — 99, Ukraine, and Uzbekistan -74 -65.
The country in all sectors of the economy is 740 joint Kazakh — Russian enterprises and companies with 100% Russian capital. Kazakh’s capital also gradually entering the Russian market.
Russia is the largest trading partner of Kazakhstan, both exports and imports. It accounts for over a quarter of the total foreign trade of the country. Last year, the volume of trade with the «northern neighbor» was the order of about $ 4 billion. Of the 89 regions of the Russian Federation subject 72 have trade and economic ties with Kazakhstan. In turn, Kazakhstan is one of ten major trade partners of Russia. The share of the republic in Russia’s foreign trade volume in recent years is 3−4%.
Foreign investment in Kazakhstan’s economy for the last three years of $ 4−4.5 billion, including logged in as equity — 144.3 million, other capital — 256.4 million and reinvested earnings — 42.5 million dollars in 2003 volume of the development of foreign direct investment in the amount of 1236.4 million dollars invested in individual sectors of the economy of Kazakhstan, the greatest share of foreign direct investment in the metallurgical complex (784.6 million or 63.5%) and oil and gas (244.8 million dollars., or 19.8%), including in the 4th quarter of 238.5 million, respectively 147.1 million or 61.7%, and 42.4 million or 17.8%. The chart below shows the development of Kazakhstan’s foreign investment by industry in 2003:
In the sectoral structure of investment industry occupy a major share of ferrous and nonferrous metallurgy, oil and gas industry continues to be one of the first places in terms of attracted investments. But sectors such as construction and manufacturing receive the least amount of foreign investment. This figure for the last two industries is not significantly changed in the last 5 years. Investors are still reluctant to invest in these sectors.
3.2 Distribution of foreign investments on areas of the republic and ownership
Table 2 Structure of investments by ownership in the Republic of Kazakhstan for 2000 — 2002 years.
Types of companies
Investments in fixed assets in 2002 at current prices, million tenge
Share in the total, the volume of investment in fixed assets,%
for businesses and organizations of all forms of ownership of all
including state ownership
Continuation of the table
Common (shared) property (without foreign participation)
Common (shared) property with foreign participation
Table 3 — territorial structure of investments in the Republic of Kazakhstan
The share of the region in the national volume
Temp 2002 to 2003,
Temp December 2003 to November 2003
The Republic of Kazakhstan
During 12 months of 2003 compared to 2002 in three regions of the country has increased its investment in fixed assets: Atyrau (62%), Aktobe (26%), Almaty (11%). Their greatest increase (5 times) is observed in the Akmola region. Decline in investment occurred in Karaganda (38%), Kostanai (51%), North Kazakhstan (52%) regions. The greatest decline (58%) noted in Zhambyl region.
3.3 Foreign investment by enterprises in Kazakhstan
It is known that one of the most important conditions for the output of the economy out of the crisis is the activation of investment activity. Investment process — is the key mechanism of expanded reproduction in the industry, which generates production potential for new scientific and technical basis, establishes a competitive position in the market, contributes to economic growth, which is important for the economy of Kazakhstan. Therefore, the problem of overcoming stagnation and achieve economic growth can only be achieved through increased investment, expansion capital investments in industrial production.
The main purpose of investment — update capital constituting the production, scientific and technical potential of the economy.
Engineering enterprises work in recent years, the shortage of working capital and the very limited investment resources, the continuing decline in investment activity.
Production engineering industry in general, the volume of industrial production is about 8%. Machine-building enterprises of the Republic of release: press-forging equipment (Shymkent), machine tools (Almaty), batteries (of Taldykorgan), centrifugal pumps (Astana), X-ray equipment (Aktobe), etc. Currently in development engineering to attract foreign investment for the organization of new industries in the country, including medical equipment, agricultural machinery, diesel engines, equipment for the food industry, electric motors and other products for industrial and technical purposes.
Sources of investment in the engineering industry can be divided into internal and external. Their relationship in a particular case depends on three main factors: the investment opportunities of the enterprise and the degree of investment attractiveness, the attractiveness of the market, from the organization to attract investment, including expenses, urgency, the degree of openness of information, etc.
During this period, the main source of financing of the investment process in engineering steel companies' own funds. In 2003, they accounted for 96.5% of total investments in fixed assets. Reliance on equity in the investment process of production indicates the ability of companies in the industry to adapt to the market economy. However, these funds is not enough today, not only for extended, but for simple reproduction. Therefore needed investment program of the government to attract foreign investors. With all the complex unattractive to investors an incentive for them can serve. Tax and customs exemptions and other tools of the government to facilitate the work of the enterprise.
Chemical, oil refining and petrochemical industry
The range of chemical and petrochemical industry of the republic — plastics, chemical fibers, tires for cars and agricultural machines, a wide range of rubber products, chromium compounds, calcium carbide, caustic soda and other products. The republic has three refineries producing gasoline, diesel, fuel oil, jet fuel and other petroleum products petroleum bitumen.
Operates a large complex processing of phosphate rock to give a yellow phosphorus (more than 90% of the total production of the former USSR), fertilizers, detergents Perspective development of this sector is associated with oil refining complex in Western Kazakhstan and the organization of new products on the basis of phosphorite deposits.
Foreign investment in the oil and gas industry
Kazakhstan attracted large foreign investment in oil and gas development. Foreign capital was attracted to 27 major projects related to the development of deposits, prospecting activities, reconstruction of refineries, oil and gas transportation. Potential investments already realized projects with foreign participation are estimated at more than $ 40 billion.
By Russian companies in joint investment projects amounted to about three billion dollars. Among the most significant of which are the development of Kumkol, development of hydrocarbon reserves of the Tengiz and Karachaganak. Large amounts of investments go to the U.S. American companies have officially announced an investment of three billion dollars to expand the project to the Tengiz oil field.
Largest oil company in Kazakhstan is «Tengiz — Shevroil », a joint venture involving ShevronTexaco (50 percent), ExxonMobil (25 percent), «KazMunaiGas «(20 percent) and «Lukarco «(5 percent), has invested in Kazakhstani oil 20 000 000 000 dollars and currently produces about 290,000 barrels per day.
Expected power Tengiz basin is 6−9 billion barrels; peak oil is expected in 2010 and will be 750,000 barrels per day.
Caspian pipeline plays a crucial role in the process of pumping oil from the giant Tengiz field, its transportation through Kazakhstan Atyrau terminal and then to the Russian oil terminal on the Black Sea coast near Novorossiysk. Novorossiisk oil will be transported to Western markets by tankers.
Caspian Pipeline Consortium includes Kazakhstan, Russia, Sultanate of Oman, Shevron, Lukarco, Rosneft-Shell, ExxonMobil, Agip International, BG Overseas Holding, Oryx and Kazakhstan Pipeline Ventures.
Western investors are eager to find new opportunities in Kazakhstan. International Energy Corporation Hurricane Hydrocarbons headquartered in Calgary (Alberta, Canada), together with «Kumkol» is developing fields in Torgai basin currently produces 120,000 barrels per day, being the second largest oil producer in Kazakhstan. Canadian- Kazakh joint venture expects to increase oil production to 200,000 barrels per day for two years, while reducing by half the cost of transportation.
Joint venture and Hurricane Hydrocarbons «Kumkol», wants to buy the French oil company TotalFinaElf. It is also expected that Hurricane Kumkol become one of the shareholders of CTC.
Drilling wells in Kazakhstan engaged in another Canadian energy company — Nelson Resources Limited. She made a successful drilling in the area Alibekmola. Nelson Resources formed a joint venture with «KazakhOil «and leads the development of two fields in Aktobe and Alibekmola / Kozhasai. The Company expects that there recoverable oil reserves are 500 million barrels.
Following the Tengiz second largest foreign investment in Kazakhstan is Kashagan area. Kashagan — the largest ever found in the world in recent decades, oil fields, estimated its reserves reach at least 10 billion barrels, and it is expected that this year Kazakhstan will auction about 100 offshore sites. Giant plot develops operating company" Agip KCO" (Agip Kazakhstan North Caspian Operating Company, AgipKCO). It is expected that the right to develop land in Kashagan will qualify for several other Western oil companies.Показать Свернуть