2007 INVESTMENT CLIMATE STATEMENT - KAZAKHSTAN

UNCLAS SECTION 01 OF 16 ASTANA 000133

SIPDIS

SCA/CEN - O'MARA
EB/IFD/OIA

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ETRD EFIN ECON EINV PREL OPIC KTDB USTR
SUBJECT: 2007 INVESTMENT CLIMATE STATEMENT - KAZAKHSTAN

REF: A. 07 State 158802

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Kazakhstan permits the importation of goods from EEC partners and
certain developing or less-developed countries either free of duty,
or at a reduced rate. There are no special requirements for engaging
in trade-related activities. In keeping with internationally
accepted practices, registration as an entrepreneur, legal entity,
or branch/representation office is required.

Right to Private Ownership and Establishment
--------------
Foreign and domestic private entities have the right to establish
and own business enterprises and to engage in all forms of
remunerative activity. Private entities can freely buy and sell
interests in business enterprises. However, state-owned enterprises
do sometimes enjoy better access to markets, credits, and licenses
than private entities.
Kazakhstan's constitution provides that land and other natural
resources may be owned or leased by persons who are Kazakhstani
citizens according to conditions established by law. The 2003 Land
Code allows citizens of Kazakhstan to own agricultural land and
urban land with commercial and non-commercial buildings and
complexes, including dwellings and land used for servicing these
buildings. Under the 2003 Land Code, only Kazakhstani citizens
(natural and legalized) and Kazakhstani companies may own land. The
Land Law does not allow private ownership for the following types of
land:
-- land used for national defense and national security purposes;
-- specially protected natural territories, resorts, recreational
land and territories of a historical and/or cultural significance;
-- forests, water reservoirs (lakes, rivers, canals, etc.),
glaciers, swamps, etc.;
-- public areas (urban or rural settlements);
-- main railways and public roads;
Short-term land leases may last for up to five years. The maximum
period for long-term land leases are 49 years. Foreigners may rent
agricultural land for up to 10 years. Foreigners may also own
agricultural land through either a Kazakhstani-registered joint
venture or a full subsidiary.

Protection of Property Rights
--------------
Secured interests in property (fixed and non-fixed) are recognized
under the Civil Code and the 2003 Land Code. Mortgage lending has
grown dramatically in the past several years. A credit bureau
system does exist, but is in very early stages of development. The
National Bank has created a national mortgage agency, which issues
bonds secured by mortgages purchased from banks. All property and
lease rights for real estate must be registered with special
government-owned Real Estate Centers, which exist in cities and
rural district centers.
In principle, Kazakhstan's Civil Code protects U.S. intellectual
property. In addition, the U.S.-Kazakhstan Trade Agreement, which
came into force in 1993, obliges Kazakhstan to protect intellectual
property rights (IPR). In 2004, Kazakhstan ratified the 1997 World
Intellectual Property Organization (WIPO) Copyright Treaty and the
WIPO Performances and Phonographs Treaty, and amended the Copyright
Law to affirmatively protect pre-existing works and sound
recordings. In 2005, Kazakhstan amended its Criminal and Civil Codes
to make IPR crimes easier to prosecute and to toughen penalties for
violators. The 2005 amendments played a significant role in USTR's
2006 decision to remove Kazakhstan from the Special 301 Watch list.
While Kazakhstan has demonstrated a commitment to improving its IPR
regime, substantial weaknesses, particularly in the area of civil
dispute resolution, still remain.
Patents and trademarks: Patent protection is available for
inventions, industrial designs and prototypes. Patents for
inventions are available with respect to processes and products that
are novel and have industrial applications. However, patent
protection for certain types of products and processes -- such as
layout designs and plant variety - is not yet available. The
National Institute of Intellectual Property performs formal
examination of patent applications.
Patents for inventions are granted for a period of 20 years; patents
for industrial designs are granted on a preliminary basis for five
years. This period may be extended for an additional 10 years if the
preliminary patent is converted to a patent. Prototypes are granted
a five-year initial period of protection, with the possibility of an
additional three-year extension. Unsuccessful applicants have the
right to appeal decisions of the National Institute of Intellectual
Property and the Committee for Intellectual Property Rights.
Kazakhstan is a member of the Moscow-based Eurasian Patent Bureau
and the Munich-based European Patent Bureau.
Trademark violation is a crime. Enforcement has historically been
questionable, but U.S. companies are generally confident that their
trademarks are protected in Kazakhstan. Still, imported counterfeit
goods can commonly be found at local markets. There are marked
disparities in fees charged to domestic patent and trademark
applicants, as compared to foreign applicants. Applications for
trademark, service mark and appellations of origin protection should

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be filed with the National Patent Office and approved by the
Committee for Intellectual Property Rights. Trademarks and service
marks are afforded protection for a period of 10 years from the date
of filing.
Copyrights: The Law on Copyrights and Related Rights was enacted in

1996. The law is largely in conformity with the requirements of the
WTO TRIPS Agreement and the Berne Convention.
In late 2006, the government stated its plans to provide customs
officials with ex officio authority to seize counterfeit products at
the border. However, appropriate legislation has not been passed.
Complicating the issue is the government's concern that granting ex
officio powers may exacerbate corruption at customs checkpoints.
Amendments to the Administrative, Criminal and Civil Procedural
Codes have been adopted to bolster IPR enforcement capabilities. IPR
enforcement measures, while still somewhat sporadic, are
increasingly robust. Prosecutions, under both the Criminal and
Administrative Codes, have led to a steady legitimization of the
domestic trade in copyrighted material. Progress in IPR protection
through civil courts is less pronounced as the judicial system
develops the expertise necessary to resolve the more complex civil
disputes.
Illegal software development and manufacture generally is not
conducted in Kazakhstan; Russia and Ukraine are believed to be the
major sources of bootleg software to the local market.
Kazakhstan ratified the Berne Convention for the Protection of
Literary and Artistic Works in 1998 and the Geneva Phonograms
Convention in 2000.

Transparency of Regulatory System
--------------
Transparency in the application of laws remains a major problem in
Kazakhstan and an obstacle to expanded trade and investment. Foreign
investors complain of changing standards and of corruption. While
foreign participation is generally welcomed, some foreign investors
point out that the government is not always even-handed and
sometimes reneges on its commitments. Although the Investment
Committee of the Ministry of Industry and Trade was established to
facilitate foreign investment, it has had limited success in
addressing the concerns of foreign investors.
Opportunities for public comment on proposed laws and regulations
are sporadic and generally limited. Often, contradictory norms
hinder the functioning of the legal system. While Kazakhstan has
recently defined more clearly which laws take precedence in the
event of a contradiction, it has become clear that stability clauses
granted investors under previous versions of the Foreign Investment
Law or other legislation may not necessarily protect investors from
changes in the legal and tax regulatory regime. The 2003 Investment
Law holds that contracts signed subsequent to its enactment may be
subject to amendments in domestic legislation and international
treaty provisions that change "the procedure and conditions of the
import, manufacture, and sale of goods subject to excise duties As
an additional complication, oblast authorities may create additional
bureaucratic encumbrances, especially in the licensing and issuance
of permits..
Kazakhstan, by law, will provide compensation for violations of
contracts that were properly entered into and guaranteed by the
government. Where the government has merely "approved" or
"confirmed" a foreign contract, Kazakhstan's responsibility is
limited to performing administrative acts necessary to facilitate
the subject investment activity (acts "concerning the issuance of a
license, granting of a land plot, mining allotment, etc.").
Kazakhstan's institutional governance is weak , further adding to
the problems of transparency in commercial transactions. Senior
government officials have a large say in minor and major
transactions, and decisions are often made behind closed doors.
A 1995 Licensing Law established the legal framework for licensing
activities in Kazakhstan. It requires the relevant agency to issue a
license within one month of a company's submitting all required
documents. The law was further amended in 1998, 2005, and January

2007. The 2007 amendments simplified procedural requirements for
issuing licenses, reduced the number of licensed activities from 426
to 100 and introduced a mechanism to help prevent the extension of
this list by other legal acts. However, licensing remains a
problematic area for business, particularly for small- and medium-
sized enterprises.

Efficient Capital Markets and Portfolio Investment
-------------- --------------
Kazakhstan's efforts to create a sound financial system and a stable
macroeconomic framework have been notable among former Soviet
republics. Much progress has been made in creating and implementing
an adequate legal framework. In comparison with other parts of the
economy, reform of the financial system has been deeper and more
effective. The financial system has started to mediate financial
resource flows and direct them to the most promising parts of the
economy. Official policy is clearly supportive of credit allocation
on market terms and the further development of legal, regulatory and
accounting systems that are consistent with international norms.

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The National Bank has demonstrated a willingness to pursue monetary
tightening in response to inflationary pressures. In 2006, it raised
the refinancing rate twice as well as toughened reserve requirements
for second-tier banks. Capital inflows and commodity exports have
enabled the National Bank to accumulate foreign exchange reserves,
and at the same time to lower interest rates and maintain inflation
in the single-digit range.
As of the middle of December 2007, the net gold and hard currency
reserves of the National Bank stood at $18.1 billion; the total gold
and hard currency reserves of Kazakhstan, including the National
Bank reserves and reserves accumulated in the National Fund, reached
$39 billion. The National Bank has pursued market-based policies
that have contributed to financial sector development and to
exchange rate stability. In 1999 the National Bank created a deposit
insurance system in order to attract the nearly $1 billion in cash
it estimated people were hoarding at home. Since then, private
deposits have grown thirty nine-fold, from less than $300 million in
November 1999, to $11.87 billion in November 2007.
Most domestic borrowers receive credit from Kazakhstani banks.
However, foreign investors find the margins taken by local banks and
the collateral required for credit to be very onerous. It is usually
cheaper and simpler for them to use retained earnings or borrow from
their home country. The Kazakhstani Stock Exchange is struggling to
gain momentum and, as such, not yet a realistic source of funds (see
below). Since 1998, Kazakhstani banks have placed Eurobonds on
international markets and obtained syndicated loans, the proceeds of
which have been used to support domestic lending. Leading
Kazakhstani banks have been able to obtain reasonably good ratings
from international credit assessment agencies. The National Bank and
the Financial Supervision Agency (FSA) supervise the banking system
and have overseen a steady consolidation and strengthening of it.
The global liquidity crunch, which hit in late summer 2007,
presented a substantial challenge to the Kazakhstani banking system,
which had come to rely heavily on external borrowing over the
preceding five-year period. Kazakhstani banks had been directing
much of the borrowed funds into the country's construction and real
estate sectors, particularly in the form both of construction
financing and for mortgages for new housing in Astana and Almaty.
The sudden global liquidity dry-up abruptly left some leading
Kazakhstani banks unable to continue their aggressive external
borrowing, forcing them to curtail their domestic lending activity.
While policymakers widely saw this development as a healthy
correction in view of the preceding liquidity glut, the National
Bank of Kazakhstan and the government introduced measures in late
2007 to provide liquidity to the banking system and inject capital
in the cooling construction sector.
Since 1999, a market for debt securities has been rapidly developing
in Kazakhstan. Several dozen bank and non-bank corporations - large
and small - have issued bills, notes and bonds with maturities
ranging from three months to seven years. Earlier issues have
matured and been redeemed; so far, there have been no defaults.
Rates for borrowers have declined on average from approximately 16%
in September 1999 to approximately 9% in 2006. Maturities have
increased from 1.5 years to up to 10 years during the same period.
Kazakhstan's pension system reform has boosted the bond market by
creating a pool of capital. The market for fixed-income securities
has grown from $74,000 in September 1999 to over $14.7 billion in
October 2007.
In 2007, the yield rate on middle-term government notes was 6.35%.
Longer-term government notes (with maturities up to 10 years) were
offered at 7.0%.
The Kazakhstani Stock Exchange (KSE) has been in operation since

1997. As of December 2007, there were 69 listed companies with 31
"A-listed" stock issues; 38 companies with "B-listed" stock issues;
and 5 non-listed issuers. There are also 62 "A-listed" and 26
"B-listed" corporate bond issues. Inadequate financial records
prevent many other companies from being put on the exchange.
Moreover, company managers fear diluting control of their
enterprises by selling more shares.
As of October 1, 2007, total capitalization of the KSE was $71.95
billion, or 70.7% of GDP Though there has been a slight decline of
capitalization over the second half of 2007, a continued annual
growth in both the absolute value of total capitalization and
capitalization relative to GDP has occurred for the last three
years.
Trading on the KSE is overwhelmingly dominated by block trades,
liquidity is low, and the spreads are extremely wide. In 2006,
several large Kazakhstani companies issued initial public offerings
on the London Stock Exchange (LSE). In compliance with a 2006 law
requiring any foreign IPO by a Kazakhstani company to be accompanied
by a domestic issuance, these companies also offered shares on the
KSE. However, despite these offerings and the Kazakhstani pension
funds' (see below) tentative moves to invest in KSE-traded shares,
the exchange remains in a very early stage of development. Due
largely to Kazakhstani companies' recalcitrance to dilute ownership
and provide extensive disclosure, the Kazakhstani debt market is
substantially more developed. The plans for the "Almaty Financial
Center" (see below) aim to spearhead the development of Kazakhstan's

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financial markets. In 2007, the Almaty Financial Center officially
announced that it would merge its efforts to create an effective
equity market with the KSE, thereby signaling that there will be
only one stock exchange in Kazakhstan in the foreseeable future.)
The Financial Supervision Agency (FSA),Kazakhstan's main financial
regulator, has broad authority over the banking and insurance
sectors, as well as the stock market. The FSA is financed from the
National Bank's budget and subordinated to the President of
Kazakhstan.
In 1998, the government introduced an accumulation pension system
that requires all employed persons to contribute 10% of their salary
to accumulation pension funds. As of November 2006, the 14 funds (13
private and one state-owned) operating in Kazakhstan held
approximately $9.6 billion in assets. Asset management companies
invest the contributions on behalf of the pension funds. While the
government provides specific restrictions on how the pension funds
may invest, these restrictions were relaxed in 2006, allowing some
involvement in Kazakhstani equities. Still, the pension assets must
be invested primarily in specific categories of instruments, such as
government bonds and A-listed securities. The largest concentration
of investments is in dollar-denominated Kazakhstani Eurobonds.
Custodian banks hold pension assets. The government plans to sell
some shares of state enterprises on the national stock market,
partly to provide a more profitable alternative vehicle for the
investment of pension fund assets.
There appear to be no "cross-shareholding" or "stable shareholder"
arrangements used to restrict foreign investment in private firms
through mergers and acquisitions. Joint stock companies may not
cross-hold more than 25% of each other's stock unless they have an
exemption codified by law and may not exercise more than 25% of the
votes in a cross-held joint stock company. Kazakhstani law
recognizes companies as "related" if one company or legal entity
holds more than 20% of the shares of another. However, the owning
company may not vote more than 25% of the total shares at the
general meeting of shareholders of the related company. The general
meeting must approve various corporate actions, such as mergers and
acquisitions. This rule applies to all persons, domestic or foreign.

There have been very few hostile takeovers in Kazakhstan, primarily
because there are few publicly traded firms. Defensive measures are
not targeted toward foreign investors in particular. Current
legislation provides a legal framework for takeovers. The Civil Code
requires a company that has purchased a 20% share in another company
to publish information about the purchase.
The mutual investment fund industry remains small but is growing
rapidly. As of October, 1 2007, total assets of the mutual
investment funds amounted to $1.16 billion, representing a 302%
increase when compared to October 2006 figures. Despite a reduction
from 37.1% in October 2006 to 15.77% in October 2007, Kazakhstani
corporate securities remain a significant share of the consolidated
mutual fund investment portfolio.
The 1998 Law on Joint Stock Companies provides the basis for the
regulation of open and closed-type joint stock companies. It also
contains clauses to protect investors in often-abused circumstances,
such as:
-- issuance of additional shares;
-- maintenance of charter capital and restrictions on payments of
dividends;
-- re-purchase by a company of its own shares;
-- debt-to-equity conversions;
-- fiduciary duties imposed on company officers;
-- proxy votes;
-- independent audit; and
-- the determination of asset values during the sale of company
property.
The Law on Joint Stock Companies also regulates tender offers for
stock of open joint stock companies by requiring the purchaser to
notify the Financial Supervision Agency and the target company of
their intention to purchase 30% or more of the target company and,
after such purchase, to make an offer to all remaining shareholders
to purchase their shares at the average price during the last six
months before the purchase.
There are no laws or regulations specifically authorizing firms to
adopt articles of incorporation or associations that limit or
prohibit foreign investments. The Law on Joint Stock Companies,
however, allows charter limits on the number of shares or votes that
one shareholder may have.
In March 2007, the Government accepted amendments to legislation
regarding the protection of minority stockholders' interests. The
enactment of this law was prompted by numerous violations of
minority stockholders' interests. In addition, this step was driven
by the Government's intention to promote the development of stock
exchange.
Standards, including sanitary and phyto-sanitary standards, are
promulgated solely by the Committee for Technical Regulation and
Metrology (Gosstandard). Proposals for adoption, amendment, or
abolishment of state standards are normally prepared by technical
committees constituted by Gosstandard, and may include producers,

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scientific and engineering associations, and technical experts.
Foreign participation in the standardization process is regulated by
international multilateral and bilateral agreements.

Political Violence
--------------
There have been no incidents of politically-motivated violence
against foreign investment projects. Kazakhstan has been stable
since independence. Politically-motivated civil disturbances remain
exceptionally rare. Kazakhstan has good relations with its
neighbors. The government continues to express concern over the
security of its borders with Kyrgyzstan and Uzbekistan, which it
views as vulnerable to penetration by extremist groups.
Kazakhstan's 2007 parliamentary elections took place without
significant violence or unrest. President Nazarbayev's Nur Otan
party won every seat in the lower house of parliament with an
overwhelming majority of the votes. In its assessment, the OSCE
noted that the election did not meet a number of OSCE commitments
and international standards for democratic elections. Although
opposition groups denounced the election as fraudulent, there were
no significant demonstrations against the announced results. The
next parliamentary election is scheduled to take place in 2012.
The February 2006 murders of a prominent opposition politician and
his two associates were perceived by opposition parties as
politically motivated. The former chief of staff of the Senate was
convicted in August 2006 of having ordered the murders; prosecutors
charged that he was motivated by personal animosity.

Corruption
--------------
Although the Kazakhstani Criminal Code contains special penalties
for accepting and giving bribes, corruption is prevalent throughout
Kazakhstan. The Ministry of Interior, the Financial Police, the
Disciplinary State Service Commission, and the Committee for
National Security (KNB) are responsible for combating corruption.
The government has taken some measures to address corruption and
increased its attention to the problem through educational and
public awareness efforts. President Nazarbayev publicly deplored
corruption and encouraged media to report about it. Some lower and
middle-ranking officials and minor political figures have been
penalized on corruption charges.
Transparency International has a national chapter in Kazakhstan. The
government has signed on to the Extractive Industries Transparency
Initiative (EITI).
U.S. firms have cited corruption as a significant obstacle to
investment. Law enforcement agencies have on occasion t pressured
foreign investors perceived to be uncooperative with the government.
The government and local business entities are widely aware of the
legal restrictions placed on U.S. business abroad (i.e., the Foreign
Corrupt Practices Act).
In 2003 in the United States two American citizens were charged with
violating the Foreign Corrupt Practices Act in a case that received
significant international media attention. The two allegedly
channeled tens of millions of dollars in bribes to two senior
Kazakhstani officials during the 1990's in order to facilitate oil
deals for American companies. One is currently serving a jail term.
The trial of the second defendant, James Giffen, began in 2007 in
Southern New York Federal District court.

Bilateral Investment Agreements
--------------
The United States-Kazakhstan Bilateral Investment Treaty came into
force in 1994. In 1992, the United States and Kazakhstan signed an
Investment Incentive Agreement.
In 1996, the Treaty on the Avoidance of Double Taxation between the
United States and Kazakhstan came into force. However, an ongoing
dispute with a U.S. investor raises concerns with the government's
tax treaty compliance. Since independence, Kazakhstan has ratified
treaties on the avoidance of double taxation with 41 countries.
Kazakhstan has bilateral investment agreements in force with forty
countries, including the United States, Great Britain, Germany,
France, Austria, Russia, Korea, Iran, China, and Turkey.

OPIC and Other Investment Insurance Programs
--------------
The Overseas Private Investment Corporation (OPIC),an independent
U.S. Government agency that provides project financing, political
risk insurance, and a variety of investor services, has been active
in Kazakhstan since 1994. OPIC is seeking commercially viable
projects in the Kazakhstani private sector. OPIC offers a full range
of investment insurance and debt/equity stakes.
Kazakhstan is a member of the Multilateral Investment Guarantee
Agency (MIGA).

Labor
--------------
The 1999 Labor Law and the Constitution guarantee basic workers'
rights, including the right to organize and the right to strike.

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Teachers, miners and workers at a variety of enterprises have
conducted occasional strikes for generally short periods during the
past several years. In September 2006 the death of 41 miners in an
explosion at Mittal Steel Termirtau's "Lenin" coal mine triggered an
unprecedented wave of strikes. Mittal's striking coal miners were
joined by steel workers which shut down operations at each of the
eight coal mines owned by the company for a week. The strike ended
after Mittal agreed to substantial raises. Subsequently, two U.S.
companies operating coal mines in Kazakhstan raised wages 25-30% in
order to avert threatened strikes.
The 1996 Law on Labor Disputes and Strikes lays out the procedure
for resolving disputes. However, the law also restricts strikes by
requiring, inter alia, that a peaceful attempt at a solution first
be made, that two-thirds of the labor collective must approve the
strike, and that the employer must be warned 15 days in advance in
writing. In addition, strikes for political purposes are forbidden.

A separate 1992 Law on Collective Bargaining Agreements sets out the
basic framework for concluding such agreements. There are instances
of unions successfully negotiating collective bargaining agreements
with management.
In May 2007, Kazakhstan passed a new Labor Code, encompassing all
the preceding legislation under a single umbrella. Key provisions
of all the previous labor laws were retained. The Labor Code
extended minimum mandatory vacation time from 18 to 24 days,
provided an outline of labor unions' and labor representatives'
rights, and toughened rules governing the dissolution of labor
contracts.
The 1993 Law on Professional Labor Unions provides a legal guarantee
against limitations of labor. It also grants socio-economic,
political and personal rights and freedoms as a result of membership
in a union and prohibits the denial of employment, the denial of
promotion or termination of employment on the basis of such
membership. Kazakhstan also joined the International Labor
Organization (ILO) in 1993. As of January 2007, Kazakhstan has
ratified 16 ILO conventions, including those pertaining to minimum
employment age, forced labor, discrimination in employment, equal
remuneration, and collective bargaining.
Kazakhstan's economy has grown steadily in the last five years.
Preliminary 2007 GDP growth is estimated at 8.7%. (The highest
year-on-year rate was 13.5% in 2001.) Although incomes and consumer
spending have risen across the board, in the 3rd quarter 2007 the
minimum subsistence wage is still only $83.. per month; with 13.8%
of the population receiving income below that level. Starting on
January 1, 2008, the minimum pension will be $65.45 per month. By
government estimates, in the 3rd quarter of 2007 unemployment was
7%.
Kazakhstan has an educated and technically competent workforce.
However, the demand for specialized skilled labor created by the
simultaneous development of several major oil fields in western
Kazakhstan has exceeded locally available supply. Foreign investors
increasingly cite a lack of skilled workers and technical
professionals. Management expertise and marketing skills are also in
short supply. Many large investors rely on foreign workers,
particularly from Turkey, to fill the vacuum. In turn, the GOK has
made it a priority to ensure that Kazakhstani citizens are
well-represented on foreign enterprise workforces, and is
particularly keen to see Kazakhstanis hired into the managerial and
executive ranks of those enterprises. In late 2006, the government
discussed measures limiting the inflow of foreign workers,
particularly unskilled, and pressuring large foreign investors to
hire and train Kazakhstanis. Since 2001, the quota system has
required employers to search for local workers prior to the issuance
of work permits for foreigners (see section A.1.). U.S. companies
are strongly advised to contact locally-based law and accounting
firms, as well as the U.S. Commercial Service in Almaty, for the
latest information on work permits.
Employers' reliance on foreign labor in the face of persistent
poverty in rural Kazakhstan became a political issue in 2006 and

2007. The debate revolved around the underlying causes of some
violent incidents between Kazakhstani and foreign workers. The
tension was epitomized by a major October 2006 brawl that involved
over 400 workers. Policymakers often point to disparities in wages
and working conditions between Kazakhstani and foreign workers.
Employers retort that the domestic lack of skilled labor frequently
necessitates management of Kazakhstani laborers by foreigners.

Foreign - Trade Zones/Free Ports
--------------
A system of tax preferences exists for enterprises engaging in
prescribed economic activities in the so-called "special economic
zones." As of December 2007, four such zones had been established:
the "New Administrative Center" in Astana, the Seaport of Aktau, the
Alatau Information Technology Park (near Almaty),and the Ontustik
Cotton Center in south Kazakhstan.). In addition, a separate
preferential tax system exists for enterprises manufacturing high
value-added goods, regardless of location.
In the second half of 2006, the government took steps toward

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establishing the Almaty Financial Center, a legal and institutional
framework aimed at making Almaty the financial capital of Central
Asia. The plans, which are still in very early stages of
implementation, include tax privileges for major participants in the
financial marketplace: investors, broker-dealers, and issuing
corporations. The legal framework for the Almaty Financial Center
includes a specialized court with jurisdiction over civil disputes
between the Financial Center's participants

Foreign Direct Investment (FDI) Statistics
--------------
Annual Gross Foreign Direct Investment Flows by Country of Origin
(Millions of Dollars; nominal)
1993-20052006 2007(1st half) Total
USA 11,841.2 1,694.7 802.2 14,338.1
UK 4,378.7 852.5 255.2 5,486.4
South Korea 1,880.9 248.6 116.6 2,246.1
Italy 2,468.3 376.1 212.6 3,057
Canada 1,481.2 437.1 273 2,191.3
Switzerland 2,021.5 234.6 367.9 2,624
Netherlands 4,940.1 2,877.3 1,170.6 8,988
China 1,680.5 359.5 171.6 2,211.6
Turkey 906.9 92.9 141.9 1,141.7
Russia 1211.1 490.9 219.0 1,921
Japan 1005.1 342.6 169.7 1,517.4
Others 6,970 2,559.9 3,033.6 12,563.5
TOTAL 40785.5 10,566.7 6,933.9 58,286.1
Source: National Bank of Kazakhstan

Annual Gross Foreign Direct Investment Flows by Sector (Millions of
dollars; nominal)
1993-2005 2006 2007 (1st half) Total

AGRICULTURE, 15.7 37.3 1.3 54.3
HUNTING AND
FORESTRY

MINING AND 22,286.2 2,323.1 2,126.4 26,735.7
QUARRYING

mining of coal 39.8 0.0 0.0 39.8
and lignite,
extraction
of peat

extraction of 20,406.3 2,003.4 1886.3 24,296
crude
petroleum
and natural
gas

mining of 146.5 162.4 83.7 392.6
uranium and
thorium ores

mining of 884.6 149.1 156.2 1,189.9
metal ores

other mining
and quarrying 50.9 8.3 0.1 55.5 114.8

MANUFACTURING 5,066.4 644.4 326.1 6,036.9

including but
not limited
manufacture of
food products, 644.7 51.9 19.8 716.4
beverage and
tobacco products

manufacture of
coke, refined
petroleum
products 508.2 -15.8 -192.8 299.6
and nuclear
fuel

manufacture of 139.8 17.9 7.9 165.6
chemicals
and chemical
products

manufacture of 32.9 7.9 12.3 53.1
rubber and
plastics
products

manufacture of 85.9 26.2 13 125.1

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other
non-metallic
mineral products

manufacture 3,068.7 423.9 385.8 3,878.4
of basic metals:
manufactures 405.7 1.4 1.6 408.7
of ferrous
metals

manufacture of 2,649.3 419 381 3,449.3
basic precious
and non-ferrous
metals

manufacture of 13.9 3.4 3.3 20.6
fabricated
metal products
except
machinery
and equipment

manufacture 21.4 4.2 0.1 25.7
of machinery
and equipment

manufacture 431.1 39.7 20.4 491.2
of electric
and computing
machinery

manufacture of 11.8 72.4 53.9 138.1
transport
equipment

manufacture, 5.0 0.7 1.6 7.3
n.e.c

ELECTRICITY, 699.2 26.6 5.3 731.1
GAS AND WATER
SUPPLY

CONSTRUCTION 416.1 378.4 243.8 1,038.3

WHOLESALE AND 1,122.8 760.9 618.7 2,502.4
RETAIL TRADE,
REPAIR OF
MOTOR VEHICLES,
MOTORCYCLES
AND PERSONAL AND
HOUSEHOLD GOODS

HOTELS AND 115.3 10.2 43.5 169
RESTAURANTS

TRANSPORT690.6 301.3 48.5 1,040.4
STORAGE AND
COMMUNICATION
land transport 378.8 23.6 20.6 423

including
transport
via pipelines 360.3 19.4 20.6 400.3

water -12.2 4.1 0.6 -7.5
transport

air transport 24.9 3.2 1.1 29.2

supporting 152.3 187.4 29.5 369.2
transport
activities

post and 146.8 83 -3.2 226.6
telecommunication

including 145 81.1 -4.0 222.1
telecommunication

FINANCIAL 494.2 375 201.6 1070.8
ACTIVITY

REAL ESTATE, 9,223.3 5,610.1 3,271 18104.4
RENTING
AND BUSINESS
ACTIVITIES

Including

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but not limited
real estate
activities 105.1 29.1 30.6 164.8

legal,
accounting, book-
keeping and
auditing 143.2 -22.5 49.6 170.3
activities,
tax consultancy,
market research,
business and
management
consultancy
geological 8,739.5 5,487.5 3,167.6 17,394.6
exploration and
prospecting
activities

EDUCATION, 295.3 99.5 47.5 442.3
HEALTH AND
SOCIAL WORK

ACTIVITIES, 360.8 0.0 0.0 360.8
N.E.C.

TOTAL 40, 785.5 10,566.7 6,933.9 58 286.1
Source: National Bank of Kazakhstan

FDI as a Percentage of GDP
2005 2006 2007(1st half)
11.58% 13.05% 15.5%
Source: National Bank of Kazakhstan

Kazakhstani Direct Investment Outflows
Millions of US dollars, nominal
Country of
Destination 2004-2005 2006 2007(1st half) Total
Austria 0.4 0.3 0.1 0.8
Azerbaijan 0.0 3.2 3.4 6.6
Armenia 2.8 0.7 0.0 3.5
Afghanistan 0.1 -0.1 0.0 0.0
Byelorussia 3.4 1.5 0.1 5.1
Bulgaria 0.0 0.0 0.7 0.7
Dominican Republic 0.0 10.0 0.0 10.0
France 0.0 0.0 3.0 3.0
Great Britain 15.5 -3.7 82.1 93.9
Virgin Islands 43.225.4 78.9 147.5
Germany 217.3 0.2 10.4 227.9
Georgia 1.9 66.0 9.2 77.1
Hong Kong 0.0 0.0 60.0 60.0
Israel 0.0 0.4 0.0 0.4
India 0.0 0.1 0.1 0.2
Iran 0.0 0.0 0.3 0.3
Italy 0.1 0.0 0.0 0.1
Canada 5.8 37.3 0.0 43.1
Cayman Islands 0.0 0.5 0.0 0.5
Cyprus 0.0 0.8 88.8 89.6
China 6.0 7.1 34.5 47.6
Kyrgyzstan 57.4 102.8 55.4 215.6
Latvia 1.9 0.0 0.3 2.2
Lithuania 0.0 -5.0 0.0 -5.0
Luxemburg 0.0 9.5 1.7 11.2
Malaysia 0.0 0.8 0.7 1.5
Marshall Islands 0.0 0.0 96.0 96.0
Isle of Man 6.6 0.0 0.0 6.6
Mongolia 0.1 0.0 0.0 0.1
Netherlands 17.5 639.4 17.6 674.5
Nigeria 0.0 0.0 0.1 0.1
Arab Emirates 0.0 1.4 37.7 39.1
Russian Federation 127.2 183.3 198.1 508.6
Seychelles 28.3 0.0 0.0 28.3
Singapore 0.0 2.4 61.7 64.1
South Korea 0.0 0.0 1.1 1.1
Spain 0.0 0.0 1.0 1.0
USA 8.1 3.2 0.4 11.7
Tajikistan 0.1 12.3 10.7 23.1
Thailand 0.0 0.0 0.2 0.2
Turkey 41.2 3.9 318.3 363.4
Uzbekistan 8.0 86.0 14.3 108.3
Ukraine 10.1 2.0 8.7 20.8
Check Republic -4.00.2 2.0 -1.8
Switzerland 127.1 77.1 157.5 361.7
Estonia 0.0 0.0 0.0 0.0
Other
Countries 6.5 4.0 0.7 11.2
TOTAL 732.6 1,273.0 1,356 3,361.6
Source: National Bank of Kazakhstan

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Investments as of 2007
--------------
The oil and gas sector accounts for approximately 71.5% of the $58.3
billion that has been invested in Kazakhstan, with U.S. firms
consistently ranking as the largest foreign investors. U.S. firms
with noteworthy investment in Kazakhstan's petroleum sector include:
Chevron, ExxonMobil, and ConocoPhillips. Other major foreign
investors in this sector include: LucArco, Agip, Shell, Inpex, Eni,
Total, British Gas, Lukoil, Mitsubishi and the Chinese National
Petroleum Corporation (CNPC).
Other major US investments include: AES (over $200 million in power
generation),Access Industries (coal mining),Philip Morris (over
$320 million in tobacco processing),and General Electric
Transportation (locomotive modernization facility). Non-petroleum
foreign investors include Mittal and BAE Systems.

ORDWAY