an introduction to kazakhstan for american businesses

K A Z A K H S T A NFOR AMER ICAN BUS INE S S E S

A N I N T R O D U C T I O N T O

WASH I NG TON D C , D E C EMB E R 2 0 1 4

Kazakhstan is home of the apple. Scientists have used DNA evidence to locatewhere the first eating apple grew. The wild variety, Malus Sieversii, which grows on the slopes of the Tien Shan mountains, is the apple’s true ancestor.

Scratch the image of the apple to unlock it’s fresh scent.

ZaysanAyagoz

Lepsi

PanfilovQapshaghay

ShuZhangatas

Saryshaghan

Balqash

Temirtau

AtbasarEsil

Rudnyy

Ekibastuz

Turkistan

Orsk

Aral

Leninsk

Shalqar

Embi

Beyneu

Aqsay

Shymkent

Zhambyl

Taldygorghan

Oskemen

Oaraghandy

Koksnetau

Petropavl

Qostanay

Arqalyq

Zhezqazghan

Qyzylorda

Aqtobe

Oral

Aqtau

Pavlodar

For more information on investing or doing business in Kazakhstan, visitwww.trevianinternational.com

Astana

Atyrau

Almaty

K A Z A K H S T A NFOR AMER ICAN BUS INE S S E S

A N I N T R O D U C T I O N T O

AN INTRODUCTION TO KAZAKHSTAN FOR AMERICAN BUSINESSES

CONTENTS

2 Kazakhstan: Facts and Figures

2 Political

2 Economic

2 Demographic & Social

4 Political Structure and Government

4 President

5 Parliament

7 Judiciary

8 History and Culture

10 Education

11 Nazarbayev University

11 Bolashak Presidential Scholarship Program

12 Human Rights

12 Human Rights Ombudsman

13 The Human Rights Action Plan

13 United Nations Human Rights Commission (UNHRC)

13 NGO Participation

14 Freedom of Religion

16 Economy

18 Special Section: Kazakhstan 2050 Strategy19 Major Sectors

20 Priority Sectors

22 Special Section: In Focus–Chemicals and Pharmaceuticals Industry

23 Special Section: The State Program for Accelerated Industrial Innovative Development (SPAIID)

24 Business and Investment Climate

25 Special Section: Doing Business in Kazakhstan26 Special Section: Eurasian Economic Union

28 Investment

28 Investment Incentives28 Investment benefits 31 Special Section: Expo 2017

AN INTRODUCTION TO KAZAKHSTAN FOR AMERICAN BUSINESSES 1

32 Investment Opportunities for U.S.Businesses

32 Oil, Gas, and Mining industries 33 Transportation & logistics34 Information & communication technology 34 Energy 34 Power generation and distribution

35 Renewables

35 Green Bridge Initiative

36 Agribusiness

37 Chemicals and petrochemical 37 Pharmaceutical and biotechnology37 Other

40 Kazakhstan-U.S. Relations

43 Trade and economic cooperation 44 Culture, democracy and human rights 45 Special Section: Jackson-Vanik Amendment

46 Regional Relations & Foreign Policy

46 Foreign policy 47 Regional security cooperation 47 Relations with Russia 47 Eurasian Economic Union (EEU) and

Customs Union

48 Regional security, terrorism and Iran’s nuclear program

48 Relations with other Central Asian states49 Relations with China

50 Looking Forward: Kazakhstan in the Future

Political

Government Type: Presidential RepublicChief of State: President Nursultan NazarbayevHead of Government: Prime Minister Karim MassimovLegislative Branch: Bicameral Parliament – the Senate (47 seats) and the Mazhilis (107 seats)Legal System: Civil Law SystemHighest Courts: Supreme Court of the Republic, Constitutional CouncilSuffrage: 18 years of age, universalCapital: Astana (pop. 800,000)Largest City: Almaty (pop. 1.5 million)Administrative Divisions: 14 provinces and 2 cities of national status

Economic

GDP: $231.8 billion (2013)GDP growth rate (annual): 6% (2013)GNI per Capita: $20,570Unemployment Rate: 5.3% (2011)Youth Unemployment: 3.9% (2012)Inflation: 5.8% (2013)FDI Stock: $123.5 billion (2013)Foreign Reserves: $27.7 billionAgricultural Products: grain (mostly spring wheat and barley), potatoes, vegetables,

melons, livestockMain Industries: oil, coal, iron ore, manganese, chromite, lead, zinc, copper, titanium,

bauxite, gold, silver, phosphates, sulfur, uranium, iron and steel; tractors and other agricultural machinery, electric motors, construction materials

Exports: $84.7 billion (2013)Imports: $48.8 billion (2013)

Demographic & Social

Population: 17.04 million (2013)Population Growth Rate: 1.17% (2014)Life Expectancy: 70 years (2014)Median Age: 29.7 years (2014)Ethic Groups: Kazakh 58.9%, Russian 25.9%, Uzbek 2.9%, Ukrainian 2.9%, Uighur 1.5%,

Tatar 1.5%, German 1.5%, other 4.0% (2009 est.)Religion: Muslim 70.2%, Christian 26.2% (mainly Russian Orthodox), other 0.2%,

atheist 2.8%, unspecified 0.5% (2009 est.)Major Languages: Kazakh (64.1%), Russian (95% – the business/government language in

the country)Urban Population: 53.6% of total population (2011)Health Expenditure: 3.9% of GDP (2011)Literacy: 99.7%

AN INTRODUCTION TO KAZAKHSTAN FOR AMERICAN BUSINESSES2

KAZAKHSTAN: FACTS AND FIGURES

KAZAKHSTAN: FACTS AND FIGURES

Nursultan Nazarbayev has served as the President of theRepublic of Kazakhstan since its independence in 1991.After the founding of the Republic, progressive economicdevelopment policies succeeded in stabilizing a highlyvolatile situation following the collapse of the SovietUnion. Kazakhstan has since emerged as the most economically successful nation in Central Asia, with abooming, market-oriented economy that has achievedan average annual growth of 8% since 2000 and with-stood the global economic crises of 2008 and 2012. Thecountry boasts a democratically elected government andan increasingly prosperous and sophisticated population,all while maintaining harmony in the country’s multi-ethnic population. Kazakh citizens have rewarded theirleader with multiple presidential landslide victories – in1999, 2006 and 2011. In 2012, President Nazarbayev announced the Kazakhstan 2050 Strategy, a vision ofKazakhstan’s future at the core of which is the aspirationto join the 30 most developed nations by year 2050. TheStrategy builds on the successes of Strategy 2030 andaims to create a diversified, modern, knowledge-basedeconomy – an open country integrated into the globalcommunity and economic marketplace.


NURSULTAN ABISHULY NAZARBAYEV

Kazakhstan’s principal ethnic

groups

Tatars1.5%

Kazakhs58.9%

Germans1.5%

Russians25.9%

Uzbeks2.9%Other groups4.0%

Ukrainians2.9%

Uyghurs1.5%

Nursultan Abishuly NazarbayevPresident of the Republic of Kazakhstan

Since its independence from the Soviet Union in 1991, Kazakhstan has moved towardsa stable, democratic transition, which resulted in the establishment of a secular constitution in 1995. The Constitution, modeled after Western principles of the separation of powers, outlines the responsibilities of the executive, legislative and judicialbranches. The executive power is under the president, the government and the ministries.The Senate and the Mazhilis control legislative powers. Lastly, the Constitutional Council and the Supreme Court control judicial power.


POLITICAL STRUCTURE AND GOVERNMENT

PresidentThe President of the Republic elected through a direct,popular vote for a five-year term. The Constitutiongives the president the power to appoint and dismissthe prime minister, with parliament’s approval. Thepresident may propose constitutional amendments,and dissolve parliament during a national crisis. Thepresident is entrusted by the parliament all legislative

powers with a majority of two thirds of both chambers.He has the right to veto laws, which may be counteredby a majority of two thirds of each chamber. As theCommander in Chief of the armed forces, the presidentretains the authority to make final decisions on issuesregarding national security and defense.

Political Structure andGovernment

ParliamentThe bicameral parliament is composed of the Senateand the Mazhilis. The Senate includes forty sevenmembers. All fourteen regions, plus the cities of Astanaand Almaty, elect two representatives to serve for six-year terms, with half of the Senate up for electionevery three years.

Fifteen members are appointed by the president ofKazakhstan with the view to ensure representation forall the diverse national, cultural components of society.

The Mazhilis, with 107 members, makes up thelower house of the legislative branch. 98 members areelected by proportional representation to serve five-yearterms, and the Assembly of Peoples of Kazakhstanchooses nine members.

The Assembly of Peoples of Kazakhstan gathersprominent representatives from the country’s 140 ethnicgroups. The Assembly’s nine representatives in the parliament are responsible for representing the

interests of the other 373 members of the Assembly of Peoples.

The parliament has the right to take initiatives butthose having budgetary implications must be submittedto the government for approval. Proposed bills are firstapproved by at least two-thirds of the Mazhilis beforethey are sent to the Senate for consideration. If the billis approved by at least two-thirds of the Senate withinsixty-days, the bill is sent to the president for his signature. However, in case they are rejected, they arereturned to a second review by the Mazhilis who mustthen vote by a majority of two thirds before returningthe bills again to the Senate. The parliament also approves the president’s appointment of the primeminister.

At the regional level, Maslikhats are local executivebodies elected in each of the fourteen regions for two-year terms through direct elections based on theprinciples of universal suffrage. Maslikhats are in charge





Karim MassimovPrime Minister of the Republic of KazakhstanMr. Karim Massimov is the current Prime Minister of the Republic of Kazakhstan. He is responsible for the implementation of Kazakhstan 2050Strategy as the country’s economy converges with the world’s 30 most advanced economies. Massimov attended universities in Moscow and Beijingand is fluent in Kazakh, Uyghur, Russian, Chinese, English, and Arabic. KarimMassimov has held multiple positions, including Minister of Economy andBudget Planning and Minister of Transport and Communications. Upon assuming the position of Prime Minister in 2007, he successfully shepherdedthe country through the global financial crisis. In 2012 Massimov assumedthe role of the Chief of Staff for the Presidential office. He was re-appointed as Prime Minister in April 2014. Massimov is now working to maintain Kazakhstan’s economic growth and implement the President’s “Kazakhstan2050 Strategy.”

Erlan IdrissovForeign Minister of the Republic of KazakhstanMr. Erlan Idrissov was appointed as the Foreign Minister of the Republic ofKazakhstan in September 2012. Prior to his current appointment he heldmultiple high level diplomatic appointments. Most prominently, he served asthe 1st Secretary of the Permanent Mission of Kazakhstan to the UN, aide tothe President of Kazakhstan, First Deputy Minister of Foreign Affairs of Kazakhstan, Minister of Foreign Affairs of Kazakhstan. Mr. Idrissov has heldmultiple ambassadorships, including the Extraordinary and PlenipotentiaryAmbassador of Kazakhstan to the United States of America, United Kingdomand Brazil. Mr. Idrissov holds a degree from the Moscow Institute of International Relations and speaks English, Hindi, Urdu and French.

Kairat UmarovAmbassador of Kazakhstan to the United StatesAmbassador Kairat Umarov has been the Ambassador to the US since January2013. Prior this appointment, from 2009 to 2013, he served as a Deputy Foreign Minister of Kazakhstan. Over his distinguished career in the foreignservice, he has held various positions at the Foreign Ministry and PresidentialAdministration, including two stints as Counselor and Deputy Chief of Mission at the Kazakhstan Embassy in Washington D.C., Ambassador-at-Largeat the Foreign Ministry, and Chief Inspector at the Center for Foreign Policyof the Presidential Administration. From 2004-2009, he served as Ambassadorto India. From 2009 to 2013 he was Deputy Foreign Minister overlooking bilateral relations with the United States, Kazakhstan's engagement with international organizations and was responsible for raising internationalawareness about Kazakhstan. He co-chaired the Kazakhstan-United StatesStrategic Partnership Commission, the main bilateral cooperation mechanism,and was Kazakhstan’s Sherpa at Nuclear Security Summits in WashingtonD.C. and Seoul.

Mr. Umarov holds a PhD in History from Kazakh University of History,Archeology and Ethnography and speaks Kazakh, Russian, English and French.Ambassador Umarov speaks frequently on Kazakhstan’s strengths as a resultof its ethnic diversity, attractive investment and business climate, and Strategic Partnership with the United States.

of social issues and under the supervision of “Akims”,who are regional prefects appointed by the president.

Prime MinisterThe prime minister is responsible for assembling andsubmitting for approval to the president a unified system of financing and labor payment for all entitiesfinanced by the state budget. In an event of formidablethreat to the functioning of the country, the prime minister is responsible for working with the presidentand the Chairs of Parliamentary Chambers of the republic to use the Armed Forces of the Republic. Theprime minister or the Chairs of Parliament Chambersbear juridical responsibility for the legality of acts ofthe parliament signed by the president as well as thoseof the president.

The president, following consultations with partiespresent in the Mazhilis selects the prime minister. Theprime minister is then appointed by majority of votesby Mazhilis for a term of 5 years. After 10 days of hisappointment, the prime minister needs to provide aproposal for the structure and composition of the government to the president. The prime minister’smain responsibility includes organization and supervision of the government, sign resolutions of thegovernment, report the directions and decision takenby the government to the president and perform other

functions linked to the organization and supervision ofthe government’s activity.

JudiciaryThe basic provisions regulating the structure and activities of the judiciary are promulgated in the constitution and the Law on the Judicial System. Thejudicial branch of Kazakhstan consists of three levels:The Supreme Court of Kazakhstan, local regionalcourts and courts with equivalent regional court status,and the local city and district courts.

In 2000, the government adopted judicial reformthat has significantly improved the country’s judicialsystem. The reform entailed formation of the Judicial Administration Committee under the Supreme Court,establishment of judicial ethics commissions, and increases in judicial salaries. It also raised the minimumqualifications for judges and increased the independ-ence of judges.

The Supreme Court has 44 members and is thehighest judicial body for civil, criminal and other cases,as well as interpreter on the issues of judicial practice.It acts as a court of appeal with regard to cases heardby lower courts and a court of original jurisdiction forcertain categories of disputes. The District courts arecourts hear most cases, civil or criminal. Regional levelcourts and city courts function as courts of appeal fordistrict court decisions.



THE HEART OF EURASIA: HISTORY AND CULTURE OF KAZAKHSTAN

Kazakhstan is built on 3,000 years of extraordinary history. The country’s developmenthas been influenced by such legends as Alexander the Great and Genghis Khan. For

centuries, the Silk Road through Kazakhstan served as one of the world'soldest and most historically significant trade routes. Modern day Kazakhstan traces its roots 550 years ago to the first Kazakh khanate in1465. All of this has contributed to the richness of the Kazakh cultureand its capacity to adapt and develop.

Kazakhstan is located in the middle of the Eurasiancontinent, sharing extensive borders with Russia, China,Kyrgyzstan, Uzbekistan, Turkmenistan and the CaspianSea. Historically, Kazakhstan was the stage for “SilkRoad” commercial linkages and political relations between different Eurasian powers. Today, Kazakhstanplays an important role as a link between Europe, Central and South Asia, East Asia, and the Asia-Pacific.

Following the emergence of the Soviet Union (USSR) in1917, the Kazakh Autonomous Soviet Socialist Republicwas formed, becoming in 1936 the Soviet Republic ofKazakhstan. The country was ruled by Soviet Russia,which inflicted drastic measures to civilians, especiallyforced agricultural collectivization, which created aprofound hunger wave that resulted in the death of40% of the population at the time.

History and Cultureof Kazakhstan

The Heart of Eurasia:

Kazakhstan’s population constitutes about 17.04 millioncitizens. The main ethnic groups present in the countryare Kazakhs (58.9%), Russians (25.9%), Ukrainians(2.9%), Uighurs (1.5%), Tatars (1.5%), Volga Germans(1.5%) and other ethnicities (4%). There are over 140different ethnic groups in Kazakhstan and the country iswell-known for its lack of interethnic tensions. Kazakhstan has put great efforts in place to maintainpeace among its ethnic groups, which is essential forthe internal stability of the country. When visiting thecountry in 2008, former UN General Secretary KofiAnnan declared, “Kazakhstan may serve as example ofa peaceful multiethnic country where ethnic diversity

is a blessing, but not a curse.” Kazakh is the official statelanguage spoken by over 64.1% of the population. Amajority of the population, 95%, speaks the Russianlanguage, which is the second official language in theRepublic and the main means of inter-ethnic commu-nication. Russian is also the primary language used inlocal state organs, administrative bodies and business.English is spoken by 15.4%. To have an internationalcompetitive edge in the 21st century, the NationalTrinity of Languages Program aims to ensure that allcitizens of Kazakhstan have full command of Kazakh,Russian and English. However, the use of Kazakh language is on the rise.


THE HEART OF EURASIA: HISTORY AND CULTURE OF KAZAKHSTAN

Astana Kazakhstan by night.


EDUCATION

Kazakhstan is committed to ensuring the education of its population. Already, 99.7% ofKazakhstan’s population is literate, making it the 24th most literate country in the world

according to UNESCO’s Education For All Index. PresidentNazarbayev recognizes that Kazakhstan’s future rests asmuch on its ability to educate its people and improvinghuman capital is a key priority.

Having earmarked billions of dollars for education reform, Kazakhstan is turning classrooms, at all levelsof learning, into modern refineries of the human capitaland talent needed to power the country’s industrial development and sustain its ever-increasing integrationinto the global economy.

Nowhere is that effort more evident than in thePresidential Interactive Learning and Teaching Initiative (PILTI), which upgraded the technologicalcapacity of thousands of secondary schools. Launched

in 2007 by former Minister of Education and ScienceZhanseit Tuimebayev, the PILTI aims to enhance theteaching of science, technology, engineering and math(STEM) by providing schools with a 21st centurylearning environment. To do that, education officialshave assembled a team of the world’s top suppliers ofinnovative education products, including members ofthe UK consortium TVET UK and the California-basedfirm Pasco Scientific. In the less than five years sinceits launch, PILTI has facilitated the installation of new

Education

STEM and language teaching technologies in morethan 20,000 classrooms across the country. More than40,000 Kazakh teachers have been trained to use thesenew tools and incorporate them into a pedagogicalmethod that emphasizes student participation, ratherthan lecturing. There are plans to continue and increasethe scope of activity of the PILTI over the next severalyears.

Nazarbayev UniversityNazarbayev University was opened in Astana in 2010with the mission of accelerating the development ofeducation and research facilities across Kazakhstan.Nazarbayev University houses undergraduate schoolsof engineering, science and technology, humanitiesand social sciences, and pre-medicine. It boasts state-of-the-art research centers devoted to life sciences,energy, and education, the country’s largest English-language library, graduate programs in business andpublic policy, and a faculty made up almost entirely ofprofessors from foreign countries. Those professors, allof them distinguished experts in their respective fields,teach classes exclusively in English to the university’sapproximately 1,000 students. Annual enrollment inNazarbayev University is expected to reach 20,000 by 2020.

In an effort to attain an educational quality on apar with the highest international standards, the university has forged official partnerships with a numberof the world’s top-ranked schools, including UniversityCollege London, the National University of Singapore,Harvard University, Carnegie Mellon University, the

University of Wisconsin-Madison, the University ofPennsylvania and the University of Pittsburgh. Partner-ships have also been established with two US Depart-ment of Energy national laboratories: the LawrenceBerkeley National Laboratory at the University of California and Argonne National Laboratory at theUniversity of Chicago.

‘Bolashak’ Presidential Scholarship ProgramIn 1993, Kazakhstan was the first Central Asian countryto launch a presidential scholarship program, ‘Bolashak’,for international study. ‘Bolashak’, which means ‘future’in Kazakh, speaks to the importance Kazakhstan putson educating its youth at the best universities in theworld. The Bolashak Program is an all-expenses paidscholarship sponsored by the government of Kazakhstanand awarded to high-performing students from Kazakhstan for graduate study at an overseas university.Upon completion of their graduate degree, Bolashakscholars are required to return to work in Kazakhstanfor at least five years. The program is designed to trainfuture leaders in business, international relations, law,science, engineering and other key fields.

Since its implementation in 1993, more than10,000 students have been awarded the scholarship,with most choosing to study in the United States andGreat Britain. They have successfully graduated fromAmerica’s leading universities including Harvard, Massachusetts Institute of Technology, Columbia,Duke, Georgetown, Emory, Carnegie Mellon, IndianaUniversity, Vanderbilt and many others.


EDUCATION


HUMAN RIGHTS

Kazakhstan has consistently recognized the importance of human rights to the successof the country. The first article of the constitution stipulates that the highest values of

Kazakhstan are “an individual, his or her life, rights and freedoms.”To that end, the government has launched several initiatives toensure the protection of universal human rights throughout the country.

Human Rights OmbudsmanThe Commissioner for Human Rights in the Republicof Kazakhstan (Ombudsman) was established in 2002by Presidential decree to investigate human rights abusesin the government and throughout the country. TheCommissioner and his associated organization, the National Center for Human Rights, have taken steps toensure Kazakhstan’s compliance with the Paris Principles adopted by the United Nations HumanRights Commission in 1991, as well as implement

recommendations by the UN member states as approved by the Kazakhstan government in 2011.

In 2013, Kazakhstan adopted a new Law on Creationof the National Preventive Mechanism against Tortureand Other Cruel or Degrading Treatment or Punishment,as part of the government’s work to ensure constitu-tional guarantees of personal inviolability and commitments under the Optional Protocol to the Convention against Torture and other Cruel, Inhuman

HumanRights

or Degrading Treatment or Punishment ratified byKazakhstan.

In January 2014, in pursuit of implementation ofthe law the Coordination Council of the National Preventive Mechanism against Torture was set up. Itgives the authority to the members of the National Preventive Mechanism to conduct monitoring visits topenitentiary institutions as defined by the law.

The Human Rights Action PlanIn 2009, President Nazarbayev announced the nationalHuman Rights Action Plan, a program to improvehuman rights in Kazakhstan in conjunction with thecountry’s assumption of the OSCE chairmanship in2010. The Plan was undertaken between 2009 and2012 in order to present recommendations for improving human rights in the country across a varietyof sectors including labor, free speech, religious freedom,minorities, and gender equality.

After the conclusion of the National Plan in 2012,a follow-up meeting between officials from Kazakhstanand the European Union discussed Kazakhstan’s intention of creating a new plan for 2015-2020. European officials cited areas for improvement butalso applauded Kazakhstan’s continued cooperationand commitment to human rights.

United Nations Human Rights Commission(UNHRC)Kazakhstan has long worked with the UN to coordinateon human rights issues and to focus on improvinghuman rights both in the country and around the world.In 2010, Kazakhstan initiated a Universal Periodic Review process under the auspices of the UN HighCommissioner for Human Rights. One of the mostprominent efforts towards improving human rights inKazakhstan has been the country’s election to theUNHRC in 2012.

Kazakhstan’s election to the UNHRC recognizedthe country’s progress towards defending human rightsand also motivates the country to continue to imple-ment these efforts. As noted by Minister of Foreign Affairs Erlan Idrissov, Kazakhstan’s election to the

UNHRC is both “a badge of honor” and “a spur to continue improving human rights abroad and athome.” Kazakhstan has acknowledged that it still haswork to do in the area of human rights reforms, but remains committed to fulfilling them.

NGO ParticipationKazakhstan supports the active and independent functioning of civil society organizations and NGOs ina variety of sectors. In 2002, the Concept of State Support for Non-Commercial Organizations wasadopted by the President to provide support for NGOs’socially significant projects through “social contracts”.In 2006, Kazakhstan adopted the Concept of Civil Society Development for 2006-2011, which serves as a“road map” for improving relations between the government and the not-for-profit sector.

As part of this effort, Kazakhstan reduced the registration fee for NGOs, signed and ratified the Optional Protocol to the 1966 International Covenanton Civil and Political Rights, simplified the often criticized reporting requirements for entities receivingforeign aid, and lifted the ban on the state financing ofNGOs. Today, the Government of Kazakhstan is activelyengaged in an ongoing dialogue with the civil society.

President Nazarbayev recognized the importanceof an effective partnership with the NGO sector and


HUMAN RIGHTS

called on the government to cooperate with these organizations to develop and strengthen the civil society. As a result, the biannual “Civic Forum” was established in 2003 to promote increased intra-NGOdialogue and NGO-state cooperation.

The Civil Forum facilitates greater involvement ofthe NGO community in the government led reform efforts. The mechanism provides non-governmentalorganizations with direct access to decision-makersand promotes engagement in meaningful dialogue,positive interaction and results-driven collaboration.

Consultative Body “The Dialogue Platform on Human Dimension”In 2013, the Ministry of Foreign Affairs created a newconsultative body “The Dialogue Platform on HumanDimension”. The purpose of the body is to foster agreater synergy between the government, the parlia-ment and NGOs in joint efforts to solidify democraticfoundation in Kazakhstan.

The members of the body include the PresidentialCommission on Human Rights, Ministry of Foreign Affairs, Prosecutor General’s Office, Assembly of Nationof Kazakhstan, Ministry of Culture and Information,Agency for Religious Affairs, Ministry of Health, Ministry of Justice, Ministry of Labor and Social Protection, Ministry of Internal Affairs, members ofthe Senate and Mazhilis (Lower House of Parliament),representatives of the political parties, The “Ak Zhol”Democratic Party of Kazakhstan, the Communist People’s Party of Kazakhstan, “NUR OTAN” NationalDemocratic Party.

Civil society is represented by over 27 NGOs, amongthem the Foundation for the Development of Parlia-mentarism in Kazakhstan, Kazakhstan InternationalBureau on Human Rights & Rule of Law, “Adil Soz” International Foundation for Protection of Freedom ofSpeech, The Civil Alliance of Kazakhstan, Charter forHuman Rights, Almaty Helsinki Committee, etc.

UN Coordinator in Kazakhstan, Central Asia Officeof the UN High Commissioner for Human Rights,OSCE Center in Astana, NDI, and Freedom House

take part in the meetings of the Advisory Body as international observers.

Freedom of ReligionKazakhstan is a multi-confessional secular state thatguarantees constitutional freedom of worship and religion to each of its 46 religious denominations. Thecountry has earned international recognition for itspromotion of freedom of religion and belief as well asits efforts to tackle intolerance and discriminationboth on domestic and international levels. Indeed, theabsence of any inter-faith conflict since the independ-ence more than 20 years ago is a testament to these efforts.

The country’s 3,088 religious organizations operatefreely without government interference. Leaders of thelargest religious associations are members of the Assembly of the People of Kazakhstan, the HumanRights Commission under the President of the Republicof Kazakhstan and local government organizations.There are more than 2,500 places of worship of diversereligions, including 2,268 mosques, 162 Russian Orthodox churches, 86 Roman Catholic churches, and614 Protestant Christian churches. The Kazakh Jewishcommunity has synagogues in Almaty, Astana, Ust-Kamenogorsk, Kostanai, and Pavlodar.

Kazakhstan’s religious diversity, tolerance, and itslocation on the crossroads of Europe and Asia make itan ideal country to facilitate global inter-faith


HUMAN RIGHTS

Mosque in Atyrau

conversation. The country has worked with partnerson a bilateral and multilateral basis to develop a dia-logue among civilizations and religions. Since 2003,every three years the country hosts the Congress ofLeaders of World and Traditional Religions. The forumwelcomes Muslim, Russian Orthodox, Roman Catholic,Jewish, Hindu, Buddhist and other religions’ represen-tatives and aims to nurture discussion on how the spiritual and moral potential of world religions can beused to prevent international conflicts and addressglobal threats, xenophobia and intolerance. Kazakhstanaims to have the forum function as a permanent inter-national organization mandated with the implementa-tion of decisions taken collectively by influentialspiritual leaders.

Within the UN framework Kazakhstan has beenactively promoting inter-religious and inter-cultural dialogue. In 2005 Kazakhstan was one of the mainsponsors of the UN Resolution on Promotion of Inter-religious Dialogue and Cooperation for Peace. Duringthe International Year for the Rapprochement of Cultures in 2010, initiated by Kazakh President Nursultan Nazarbayev in the 62nd session of the UNGeneral Assembly, more than 1000 events were heldaround the world by member states, international and

regional partners and UNESCO. Building on the successof this initiative and with Kazakhstan’s advocacy, theUN General Assembly then adopted a resolution proclaiming the years 2013-2022 the InternationalDecade for the Rapprochement of Cultures.

Kazakhstan has used its presidencies of the Organization of Islamic Countries (OIC) in 2011 andthe Organization for Security and Cooperation in Europe (OSCE) in 2010 as platforms for strengtheningWest-East dialogue. During the OSCE presidency Kazakhstan hosted High-Level Conference on Toleranceand non-Discrimination in Astana to promote the values of tolerance, non-discrimination inter-culturaldialogue.

HUMAN RIGHTS


Ascension Cathedral is a Russian OrthodoxCathedral in Almaty Kazakhstan


ECONOMY

Kazakhstan’s economy grew at an average of 8% per year over the past decade. Thecountry’s economic development strategy emphasizes modernization and diversification,shifting away from its resource-based economy towards growth from non-oil sources.

The government recognizes the importance of diversification, innovation, investment in human capital, and international trade integration as a mechanism for job creation. Increasing emphasis is also being put on strengthening governance in order to support businesscreation and private sector growth.

Kazakhstan weathered the global financial crisis wellthrough a dexterous response, combining fiscal relax-ation with monetary stabilization. In 2009, the government introduced large-scale support measuressuch as the recapitalization of banks and support forthe real estate and agricultural sectors, as well as for

small and medium enterprises (SMEs). The total valueof the stimulus programs amounted to $20 million, or14% of GDP. During the global economic crisis, Kazakhstan’s economic growth slowed down to 1.2% in2009, while the annual growth rate subsequently in-creased to 5% and 6% in 2012 and 2013, respectively.

Economy

Kazakhstan’s “brand perception” is at its highest inseveral years with increased awareness from establishedand non-established investors, especially in the areasof energy, industrial and automotive divisions, high-tech,telecommunication infrastructure and business. Established foreign investors in Kazakhstan view thecountry as the most attractive post-Soviet investmentdestination and highly value Kazakhstan’s macroeco-nomic and sociopolitical stability, as well as its competitive corporate tax rate.

Kazakhstan’s external financial position has improvedas commodity prices have strengthened. Despite thelingering uncertainty of the global economy, Kazakhstan’seconomy has been stable. GDP growth in 2013 was 6%,growth in processing industries was 1.6%, the miningindustry grew 3.1%. industrial growth was 2.3%. Agricultural output increased to 11,3%, transportationand telecom industries showed growth rates of 7.6%and 14% respectively.


ECONOMY

16141210864

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP GROWTH CONSTANT PRICES (ANNUAL %)

02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1

2

3

4

5

6

7

8

9

10

KAZAKHSTAN REAL GDP

BILLIONS (CONSTANT 2005 USD)

Energy has driven much of this growth but the government has also used funds from this sector to diversify Kazakhstan’s economy. The National (Oil)Fund, oil- and gas-revenue based “fund for future

generations” established by President Nazarbayev in2000, has accumulated more than $70 billion in 2013and is the cornerstone to managing and preserving thecountry’s social-economic stability.


ECONOMY

Kazakhstan 2050 Strategy

The Kazakhstan 2050 Strategy, a successor to Kazakhstan 2030, is a vision of Kazakhstan’s future thatbuilds on the successes of the country in creatinggrowth through a market-oriented economy. At thecore of the 2050 vision is that Kazakhstan will join the30 most developed nations by 2050 as measured byGDP per capita as well as a wider range of social, environmental and institutional achievements: ahighly educated, gainfully employed, healthy and securepopulation; an efficient, sustainable and diversified energy sector; a green economy with clean air andwater, resilient to the risks of climate change; a balanced, efficient and decentralized urban and regional economy; a diversified modern knowledge-based economy; a country open to and integrated withits neighbours and the world; and above all, an effective, inclusive, transparent and accountable economic and political system.

To achieve the goal of economic diversificationaway from extractive industries, the government haslaid out a plan, so called Industrialization Map, to implement more than 700 projects worth over $75 billion, nearly a third of the government’s current

GDP, over the next several decades. The priority projectsinclude those focusing on the development of humanresources and effective institutions. Other projectscover wide-ranging reforms in industrialization, infrastructure, energy efficiency, agriculture, sustain-able urban development, cultural development, andeconomic integration. The projects will create approximately 220,000 jobs during the implementa-tion period and an additional 180,000 jobs in the long-term.

The strategic priority of economic diversificationand modernization reinforces the need for foreign direct investment (FDI) as the key instrument. Thecountry has a comprehensive integrated system promoting inflow of FDI into priority industries. Thegovernment provides for investment preferences thatinclude exemptions from corporate and land tax for 10years, property tax for 8 years, customs duties, stategrants in kind, stable regime of taxation (excludingVAT and excises), environmental charges and otherbudgetary payments for a period of 10 years from themoment of the conclusion of investment contracts, reimbursement of the investor’s capital expendituresup to 30% of the project amount, industrial privilegesfor legal entities carrying out strategic investment projects in residential areas with a low level of socialeconomic development, possibility of bringing andkeeping high skilled labor force for a period of the investment project and up to one year after its commissioning, etc. In addition, the country has established nine special economic zones where companies enjoy a special legal and taxation regimethat is locked in for 20 years.

The seaport city of Aktau Kazakhstan.

Major Sectors

Energy: Kazakhstan ranks among the world’s top 20 oilproducers, with the ninth-most proven reserves in theworld and about a 2% share in global production.Kazakhstan holds 30 billion barrels (four billion tones)of proven recoverable oil reserves and potential reservesof 100-110 billion barrels. New projects being developedhave led industry experts to estimate that by 2015,Kazakhstan will be one of the top five oil exporters inthe world, with three million barrels per day.

Since 1991, Kazakhstan’s oil sector expanded rapidlywith the discovery of new fields, the development ofdownstream infrastructure and favorable worldwidecommodity prices. By 2013, Kazakhstan’s extractive industry made up about a quarter of the country’sGDP, while crude oil alone accounted for 60% of allexports. The oil & gas sector currently accounts for 2/3of all tax (budget) revenues.

Kazakhstan’s leadership was conscious of the dangerof falling into a stagnated path of development causedby an overconcentration of resources into the oil andgas sector, known as the “Dutch disease.” The National(Oil) Fund, an extra budgetary, off-shore fund modeledafter the Government Pension Fund of Norway, was

established in 2000 with the goals of saving governmentresources for future generations and reducing budgetarydependence on global commodity prices, thereby creating for fiscal management.

By saving a portion of the tax revenues generatedby oil-related activities in the Fund, the authorities areable to build up an emergency savings fund fromwhich they can draw on to close funding gaps whenthere is a shortfall in revenues or in a time of economicrecession to stimulate macroeconomic growth. In 2013the Fund’s reserves amounted to $70 billion, equaling35% of GDP in 2013. During the 2008–2009 financialcrisis, oil fund savings were used to finance a majorpart of stimulus package (around $10 billion) thathelped alleviate the economic downturn. After the crisis, the stimulus was unwound and the non-oildeficit has been declining.

Mining: Since 2011 Kazakhstan has become theworld's leading uranium producer, with almost 35% ofglobal production. Kazakhstan has the second largesturanium reserves in the world. KazAtomProm, the national uranium holding company, manages seventeenprojects, twelve of which are jointly-owned and executedby foreign firms, including Rosatomprom (Russia),


ECONOMY

Kashagan offshore oil field in the Caspian Sea

AREVA/COGEMA (France), Uranium One (Canada),and CAMECO (Australia). Among these ongoing projects include South Inkai, Budenovskoye 2, andTortkuduk, which are considered to be among the tenlargest uranium mining sites in the world.

In addition to uranium, Kazakhstan contains 4% ofglobal iron reserves, 8% of the world’s zinc reservesand 4% of the world’s chrome reserves. The countryhas also significant reserves of rare-earth metals. In2013 production of beryllium, tantalum, niobium, etc.amounted to 1.5 thousand metric tons. To process andexport rare earth metals to overseas market KazAtomProm has established joint ventures withrenowned companies from Japan, Korea, EuropeanUnion and other developed countries.

There are sufficient coal reserves to last over thenext 100 years. In the future, the development of theraw materials base will be achieved through enrichingand improving the quality of coal and the deep processing of coal to obtain fluid fuel and syntheticsubstances. As an alternative source of energy,methane from coal layers in the Karaganda basin canbe extracted, compressed and piped to market to satisfy large-scale energy needs.

Priority Sectors

Kazakhstan is deeply committed to diversifying itseconomy outside of the hydrocarbon and mining sectors.There are numerous other sectors where the countryshows high growth potential in the coming years andthe government is actively supporting investment inthese areas. In June 2014, the government announcedthat foreign investors in non-energy sectors would receive a new set of preferences. Among them are exemptions from corporate and land tax up to 10 years,property tax for 8 years, reimbursement of investmentcosts and expenditures up to 30%, possibility of bringing and keeping high skilled labor force for a period of the investment project and up to one yearafter its commissioning, stable regime of taxation and

environmental regulation within investment contracts,to name a few.

Machinery: The production of machinery andequipment is vital to Kazakhstan’s development and relates to several other core economic goals, such asthe growth of the energy and mining sectors as well as infrastructure. Manufacturing that serves the country’sbooming construction sector is also a high-growth opportunity and the gross value-added amount forKazakhstan’s industrial engineering sector in all of2008 was equaled in the first half of 2013, a sign of themachinery sector’s booming growth.

Agriculture: Kazakhstan is already one of the top10 grain exporters in the world and the growing cattleproduction sector shows great promise. With abundant,rich grazing lands, premium beef has seen an especiallyhigh rate of growth and in 2013 the number of cattleowned by private farmers grew to 13.7%

Green energy: Part of Kazakhstan’s 2050 targets includes having 50% of domestic energy consumptionmet by renewable sources. Wind, hydro, and solar energysources are abundant in the country and renewablesources are expected to contribute 1 billion kWh in2014. It is expected that during EXPO 2017 “Future ofEnergy” in Astana the country will showcase the firstresults of its strategy to develop alternative energy solutions.


ECONOMY

*(See Investment Opportunities for US businesses section below fordetailed information on these sectors)

Information Technology: Kazakhstan’s strategic location between China and Europe allows for it toplay a critical linking role between these economic gi-ants, as well as acting as the communications hub forCentral Asia. Exports of ICT products and servicesquintupled between 2007 and 2012. The governmentis looking to further develop the telecoms, electronicservices, and software sectors through fostering privatesector initiatives and supporting IT infrastructure suchas IT Park “Alatau” near Almaty.

Tourism: Kazakhstan’s natural beauty and rich history provide underutilized resources for a prosperoustourism sector. Eco-tourism is already being developedin the country’s 11 national parks, where infrastructureand tourism services represent growing opportunities.Kazakhstan boasts world-class ski resorts and hostedthe 2011 Winter Asian Games. Four UNESCO WorldHeritage sites include three historical locations, whilethe country’s Silk Road heritage provides a unique historical legacy for tourists. It is expected that duringEXPO2017 more than 2 million tourists will visit Kazakhstan.


ECONOMY

A mountain valley in Dzungarian Alatau Kazakhstan.

In Focus: Chemicals and Pharmaceuticals IndustryKazakhstan is well-positioned to develop a chemicalproduction sector given its wealth of raw materials: 99out of the 110 elements of the Period Table can befound on the territory of Kazakhstan. To date, 70 elements have been explored and 60 have been extracted.The most significant of these include oil and gas, uranium, zinc, as mentioned, but also lead (secondlargest reserves in the world), manganese (third largestreserves in the world), and copper (fifth largest reservesin the world). Petroleum-related downstream products,such as phosphates and sulfuric acid, are part of thisfocus. Chemical production increased by 5.9% in 2012and the country plans to develop the sector further for export purposes. The pharmaceutical sector will takeadvantage of the high level of scientific and educationaldevelopment in the country’s southeast area.

Other mining operations in the country focus ontungsten, bohrium, silver, chromites, copper, fluorides,

molybdenum, and gold. Many of these minerals can beused in the production of petroleum-related downstreamproducts. Sulfur reserves found in the composition ofore can be used to produce sulfuric acid and otherchemical products used in the production of almost alltypes of petrochemical synthesis products, includingethylene, polypropylene, rubber material, synthetic detergents, soaps, chemical fibers, cement, syntheticresin and plastics.


ECONOMY

The State Program for Accelerated Industrial Innovative Development (SPAIID)

Launched between 2010 and 2014, the State Programfor Accelerated Industrial Innovative Development(SPAIID) is a short-term program that provides investment incentives to small and medium enterprisesas well as large firms developing manufacturing andinfrastructure facilities in the country. Some 672 newprojects were launched, creating 67,000 permanentnew jobs, contributing $17.4 billion in manufacturingand generating $724.4 million in exports, during thefirst four and a half years of SPAIID’s implementation.Among the successful projects were power lines, drillPDC bits, chemicals and cement factories.

According to the Minister of Economy and BudgetPlanning, Yerbolat Dossayev, SPAIID has increasedKazakhstan’s production capacities and profoundly

contributed to economic growth and development.Moreover, the program was essential to stabilizing theeconomy and employment during the 2008 global financial crisis. Since 2008, Kazakhstan`s nominal GDP doubled, reaching $185.7 billion by 2013. Between2010 and 2015, Kazakhstan seeks to implement majorindustrialization projects that will (1) increase the capacity to manufacture goods competitive for export,and (2) expanding opportunities for SMEs through thedevelopment of local content, subsequent conversionand processing. On July 2nd, 2014, the Kazakh govern-ment presented a report to President Nazarbayev entitled New Industrialization of Kazakhstan: Results ofHalf Year of 2014, which reviewed the success of earlierprojects and outlined new ones. According to the report,a number of innovative, new projects will be developedwith the help of foreign companies including IVECO(Italy), Toyota Tsusho Corporation (Japan) and Byelkamit (Italy-U.S.). In addition, the advent of theCustoms Union and the Eurasia Economic Union(EEU) has helped the economy increase its exports ofprocessed artifacts; for example, the size of vehicle-related manufacturing increased 24-fold since 2010.

With the help of investments made by transna-tional firms, Kazakhstan will be starting in 2015 a newfive-year project of the SPAIID program focusing onmetallurgy, oil processing, petrochemicals, the chemicals industry, food processing machinery engineering, and construction materials.


ECONOMY


BUSINESS AND INVESTMENT CLIMATE

Kazakhstan has made significant efforts to remove bureaucratic obstacles to investment and the creation of an attractive business environment. The country ranks 77th in the World Bank’s Ease of Doing Business

Index, and 50th in the World Economic Forum’s CompetitivenessIndex. The Constitution affords foreign companies the same rights and obligations as Kazakh nationals. The Investment Code guarantees

legal equality between local and foreign investors, protects investor’s rights,allows for the legal arbitration of disputes, guarantees against nationalization

and affirms the right to repatriate profits. Thanks to these, the country ranks 22nd in the Investor Protection Index of the World Bank.

Business and Investment Climate

The government's efforts to strengthen the state's fiscalbalance, reduce the national debt, and aid the recoveryof the banking sector following the 2007-08 crisis,prompted Fitch Ratings to upgrade Kazakhstan's sovereign rating to BBB+ with a stable outlook in

November 2012. Kazakhstan’s business-friendly lawssupport the growth of foreign investment and strongereconomic growth.

The government provides investment preferencessuch as exemptions from customs duties, state grants in

kind, privileges relating to land tax and property tax forlegal entities carrying out strategic investment projects,and industrial incentives for legal entities carrying outstrategic investment projects in residential areas with alow level of socio-economic development. The countryhas a comprehensive integrated system promoting inflow of foreign direct investment into domestic production with high value added and export orientationof high value added domestic production. The govern-ment provides for certain investment preferences thatinclude: exemptions from customs duties; state grantsin kind; privileges relating to land tax and property taxfor legal entities carrying out strategic investment projects; and industrial privileges for legal entities carrying out strategic investment projects in residentialareas with a low level of social economic development.

In addition, the country operates 9 special economiczones where companies enjoy special legal and taxationregime. The status is locked-in for 20 years.

In 2013, FDI amounted to $24 billion, the equivalent of 10% of GDP. FDI has introduced newforms of technology and jobs for domestic firms andsubcontractors that partner with foreign entities, whiletransferring skills and know-how to the indigenouslabor force. While the majority of FDI to date has beenchanneled into the oil, gas and mining sectors, andtheir associated services, the government emphasizespromoting FDI into other industries and reduce thecountry’s dependence on extractive industries, as partof its 2050 strategy.



Doing Business 2015 Rank

77

Doing Business 2014 Rank

76

Change inRank

-1

Starting a Business 55 53 -2

Dealing with Construction Permits 154 152 -2

Getting Electricity 97 92 -5

Registering Property 14 18 +4

Getting Credit 71 67 -4

Protecting Investors 25 21 -4

Paying Taxes 17 16 -1

Trading Across Borders 185 186 +1

Enforcing Contracts 30 35 +5

Resolving Insolvency 63 82 +19

DB 2014Rank

DB 2013Rank

Change inRank

Topics

Data from World Bank

Eurasian Economic UnionThe Eurasian Economic Union (EEU) builds on thesuccesses of the Customs Union (CU) and CommonEconomic Space (CES) to establish a market of over171 million people with an annual GDP of $2.7 trillion.The objectives of the EEU are to form a legal frameworkfor a united economic zone, establish a common energymarket, and enable the free movement of labor andcapital, between Belarus, Kazakhstan, and Russia.

It is important to note that the EEU is an economicunion only and not a political union. Each EEU memberstate retains veto power on proposed decisions or policies. The veto allows each state to preserve its national sovereignty on issues related to trade and investment. Kazakhstan does not support the creationof any related supra-national political entity that wouldundermine the country’s national sovereignty and territorial integrity, such as an EEU Parliament.

Kazakhstan’s integration into the Customs Unionwith Russia and Belarus, which took full effect in January 2012, has cut the border-crossing time in half.

Deeper integration under the umbrella of the EEUpromises to further reduce transportation and transac-tion costs. As a result of the creation of a new businessenvironment and conditions for interaction betweendifferent businesses, it is estimated that member stateswill experience a 25% growth by 2030.

For companies that operate in the region, integra-tion of the markets and harmonization of customs andtrade policies will allow for capturing a range of positivesynergies in capital optimization and efficiency leverage.With a total middle class of 76.8 million people(around 30% of the population in Kazakhstan andmore than 55% in Russia) that is growing at an annualrate of 7%, there will be immense growth in demandfor goods and services. Russia now contains the sixthlargest middle class in the world, as measured by purchasing power parity.

Kazakhstan is a great springboard for businessesinterested in expanding operations to other countriesin the EEU, Central Asia and the Caucuses. Kazakhstanshares borders with China, Kyrgyzstan, Uzbekistan,



706050403020

100

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013-10

-20-30-40

KAZAKHSTAN VOLUME OF IMPORTS AND EXPORTS

Volume of imports of goods and services (% Change)

Volume of exports of goods and services (% Change)

Turkmenistan and Russia, and is a littoral state to theCaspian Sea. There are regular ferries between the portof Baku in Azerbaijan, and the port of Aktau on Kazakhstan’s Caspian coastline. The simplified trade procedures of the EEU will allow companies to declaregoods in one location, and deliver them to populationcenters throughout member states’ without facing additional bureaucratic barriers.

The EEU was been created to facilitate trade, bothinside of the Union and with outside economies, not to

act as a barrier to trade. As such, it is a stepping-stonetowards Kazakhstan’s broader integration into theglobal market. It is important to emphasize that theEEU’s trade rules are compatible with those of othertrade blocks, including that of the European Union.Kazakhstan is expected to gain full admission into theWorld Trade Organization (WTO) by 2015, which willfurther supplement the trade and investment gainsachieved under the auspices of the EEU.



120100806040200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

KAZAKHSTAN TRADE (% OF GDP)

InvestmentKazakhstan emerged as the strongest performing econ-omy in Central Asia since the fall of the Soviet Union.It was the first former Soviet Republic to repay all ofits debt to the International Monetary Fund, sevenyears ahead of schedule. In 2002, the country becamethe first sovereign state in the former Soviet Union to

receive an investment-grade credit rating from an in-ternational credit rating agency.

Due to its relatively stable macroeconomic envi-ronment, wealth of natural resources, and supportiveregulatory environment, as well as its proximity tolarge regional markets, Kazakhstan has been relativelysuccessful in attracting FDI since its independence.



Investment IncentivesKazakhstan has institutions to promote and support investment, including KazNexInvest and the ForeignInvestors’ Council, and the newly established role of aninvestment ombudsman that helps facilitate communi-cation between investors and the government and helpinvestors address their issues. In recent years, govern-ment-supported enterprises have also entered jointventures as an effective instrument to bring in foreignexpertize and capital necessary to co-fund projects inconstruction, logistics, petrochemicals, manufacturingand IT.

In 2014, the Kazakh government revealed a newset of measures designed to attract large-scale FDI.Among the new policy measures are 10-year corporatetax exemptions, provision of investment subsidies andeasing of barriers to employing foreign skilled workers.The new policy measures will also provide for greaterstability and predictability in the area of governance,

thus protecting foreign investors. In addition to thecreation of an investment ombudsman office, the government is also aiming to reduce the regulatoryand administrative burdens on new businesses by creating “one-stop shop” investment vehicles.

Investment Benefits Kazakhstan is one of the most investment-friendlytransit hub for the greater Eurasia region. Kazakhstanrecently jumped to the 40th spot on the World Bank’sLogistics Performance Index, from the 86th spot. By2020 the country aims to become a key logistics hubfor Eurasia and beyond by developing transportationand export centers on the territory. Kazakhstan isbuilding the Western Europe -Western China Interna-tional Transportation Corridor, which will reduceground transportation time for cargo vehicles from 30to 10 days, and multiply total transit cargo volume by1,000%, from 16 million to 170 million tons.

141210864

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FOREIGN DIRECT INVESTMENT NET INFLOWS (% OF GDP)

Improved infrastructure will generate multiple positiveexternalities. In the short term, the development of infrastructure will increase Kazakhstan’s GDP by 68%,above a 2010 baseline, and will boost the GDP ofneighboring countries by 43%. In the long term,

developed logistics corridors will simplify supply-chaining and goods distribution for domestic and internal firms, allowing goods to move to markets efficiently.



The city of Almaty Kazakhstan.


The Bayterek Tower and city fountain.


From June 10 to September 10,2017, Astana, the UNESCO-declared “City of Peace,” will bethe first city in the Common-wealth of Independent States (CIS) to host the EXPO2017

exhibition. This is a great point of pride for Kazakhstan.The theme of EXPO2017 is the ‘Future of Energy’. Theevent will gather experts from around the world topresent innovations and global best practices for variousenergy applications. The exhibition will serve as a basisfor multinational scientific, technical, political and cultural exchange, discussion, collaboration and cooperation. EXPO2017 will make a significant contri-bution to the development and use of alternative energysources globally, creating more environmentally-friendly economies as well as provide an impetus forKazakhstan’s own transition to a green economy.

The event will be held during Astana’s 20th anniversary as the nation’s capital and will celebratethe emergence and successes of independent Kazakhstan.The hosting of such an important event affirms thegrowing recognition of Kazakhstan as a strong actor ininternational affairs. EXPO2017 will not only increaseglobal recognition of Kazakhstan as a leader in

alternative energy solutions, but also reinforce thecountry’s integration into the global community andeconomic marketplace.

EXPO2017 will generate significant urban develop-ment advances in Kazakhstan. The government has already allocated $325.25 million to build the expositionsite, ground infrastructure and transit routes. Officials anticipate an additional $1.3 billion in FDI into infra-structure projects–roads, railways, and buildings. Thisis creating jobs and will have lasting economic impact.Kazakhstan is proceeding with the preparations for theexhibition ahead of the schedule, with constructionbeginning in October 2014, two months ahead ofschedule. After EXPO2017, this new infrastructure willimprove the quality of services provided to the localpopulation and businesses.

Nearly five million people from 100 countries areexpected to attend EXPO2017, which would make it thelargest international gathering Central Asia has everwitnessed. To increase the accessibility of the event topeople from all around the world, Astana plans to install streaming cameras throughout the EXPO site.Tourism will enjoy growth in years following the eventas a result of the improvement in the image of thecountry abroad.

EXPO2017


Adrian Smith+Gordon Gill Architecture will design the Astana Expo 2017 site.


INVESTMENT OPPORTUNITIES FOR U.S. BUSINESSES

Oil, Gas, and Mining industriesThe oil and gas sector represents a major dimension of the U.S.-Kazakhstan bilateralpartnership. After all, in 1993, Chevron became the first major Western oil company toinvest in Kazakhstan with the creation of TengizChevroil. Over the past twenty twoyears, Western energy firms and their advanced technologies have been essential to

fueling the growth of Kazakhstan’s oil industry and uncovering some of the most challenging offshore, deep-sea energy deposits in the world.

Investment Opportunities for U.S. Businesses

Today, Chevron is Kazakhstan’s largest private oil producer, while ExxonMobil also maintain significant operations in the country. Chevron, owns 15% of theCaspian Pipeline Consortium, 50% of Tengiz and 18%of Karachaganak hydrocarbon field. The ExxonMobilCorporation owns 7.5% of shares of the CaspianPipeline Consortium, 16.81% of the Kashagan oil fieldand 25% of the Tengiz oil field. Subsequently, U.S.

firms hold significant shares of Kazakhstan’s oil assets:the Kashagan field (5.4 billion tons of oil and 1.7 billiontons of recoverable oil), the Tengiz field (3.1 billiontons of oil, of which 0.75 – 1.1 billion are recoverable,the Korolev Field (188 mil tons of total reserves), andthe Karachaganak field (initially 1 billion tons of oil,condensate, and natural gas).

Mining represents 27% of the country’s GDP and hasimmense growth potential. Assuming the upward trendin global commodity prices for uranium, zinc and coppercontinue, foreign businesses have many investment opportunities in the Kazakh mining industry. Kazakhstan’s gold reserves, for example, are consideredto be the eighth largest in the world, have not yet beenfully tapped.

Transportation & LogisticsKazakhstan is a landlocked country. As a result, trans-portation costs remain high and the limited number ofexport routes challenges Kazakhstan’s development.Despite this, the government recognizes the value ofKazakhstan’s location in the middle of Eurasia, andseeks to attract investment for the development of

logistics, road and rail infrastructure, and technologies.The country needs to specifically modernize its infra-structure and invest in this sector with projects averaging$25 billion by 2030, which 40% will be in railway systems, 23% in roads, and 12% in water transport systems.

Recently, the logistics-focused Khorgos East GateSpecial Economic Zone (SEZ) has been established onthe China-Kazakhstan border to generate business initiatives such as a storage and transport facility, foodproduction, textile manufacturing, chemical and metaltreatment. U.S. firms Deloitte and AECOM have beencontracted to develop the center. Such ventures, if successful, will likely be replicated across the country.



The Chevron Tengiz is the world’s deepest operating super-giant oil field, with a complex geologyand extremely high reservoir pressure.

Information and Communication TechnologyTechnological innovation is at the forefront of efforts todiversify Kazakhstan’s economy. The government aimsto become a major technological hub in Central Asia,focusing on ICT. Relatively high literacy and educationlevels as well a population with a median age of 30 yearsrender Kazakhstan’s workforce capable to work in thissector.

The government recognizes the important role oftechnological innovation in the diversification of theeconomy. The Park of Information Technologies inAlatau, a special economic zone, has been establishedto facilitate transfer of technology and foster innovation.U.S. firms Microsoft, Hewlett Packard, Sun Microsys-tems, and Cisco Systems have demonstrated interest inthe Alatau technology park, as well as Thales (France),Siemens (Germany), LG (South Korea), and Samsung(South Korea). Oracle maintains an office in Almaty,while Samsung’s Almaty office is its headquarters for allof the operations in Central Asia and Mongolia.

The local demand for high-quality telecommunicationinfrastructure and services, particularly Internet accessand data transfer services, is increasing with rapid economic and social progress. There is a demonstratedmarket demand for a more agile technological infra-structure, included upgraded telecommunications networks in rural and urban areas and enhancingbroadband Internet access. While there are internationalfirms working on these projects, Kazakhstan is interestedin attracting the high-tech expertise of U.S. companies.

Energy

Power generation and distributionAccording to the Ministry of Industry and New Tech-nologies, Kazakhstan aims to produce 150 billion kWhof electricity by 2030 to meet anticipated demand.Electricity production centers are located in the Northeast of the country near coal and hydro-poweredstations. During the Soviet Union, Kazakhstan was partof an electricity grid that spanned all of the CentralAsian republics. Today, there are three electricity grids



The Moinak hydropower plant is one of the largest energy projects in Kazakhstan.

in the country: Surplus energy generated in the north issold to Russia, Kyrgyzstan and Uzbekistan. The insuffi-cient generating capacity in the south and lack of capacity to regulate generating frequency (i.e. to matchgenerating capacity to meet demand during peak loads)are problems that need to be addressed by modernizingexisting facilities and adding new power plants. Improving the quality of power generation and distribu-tion services and hardware is a significant growth opportunity for Kazakhstan. There are also plans totransition to smart power systems, which could createnew opportunities for U.S. companies.

RenewablesThe country has significant potential in the renewableenergy sector with its low population density and accessto renewable energy sources such as wind, sun, andwater. The UNDP estimates that potential for wind energy in Kazakhstan alone exceeds the country’s currentenergy consumption by ten-fold. The government aimsfor the share of renewable energy in domestic electricitygeneration to rise to 30% by 2030 and 50% by 2050. By2020, the country should have thirteen wind, fourteenhydropower and four solar power plants, as well as anuclear power plant.

Green Bridge InitiativeKazakhstan’s Green Bridge Initiative is based on fivefundamental principles, including (1) the leading roleof the government in energy reforms, (2) the long-terminterests of investors in green business, (3) the coopera-tion of the public- and private-sector, (4) effective

management and (5) a results-oriented approach tonew energy projects. The objectives of the Green Bridgeprogram are designed to strengthen national governanceof natural resources, develop informational infrastruc-ture, boost outreach and education, encourage greenbusiness and related technologies, introduce effectivefinancial and economic mechanisms, and the creationof unified standards for the green economy.

The Green Bridge targets conservation in five coresectors: mountainous and wetland ecosystems, sustain-able energy (availability and efficiency), food security,urban infrastructure and transport, adaptation to climatechange and natural disasters.

As the underpinning to the Green Bridge, the mainprovisions of the Global Energy-Ecological Strategy,aimed at managing the long-term transition from conventional to sustainable energy, were reflected inthe Framework for Action and Follow-up of the Outcome document.

Kazakhstan was hit by two major disasters in the20th century: 500 nuclear weapon tests at the Semi-palatinsk test site and the drying up of the Aral Sea dueto the diversion of water from the Amu Darya and SyrDarya rivers for irrigation. Against this background, thepeople of Kazakhstan have been particularly consciousof the need for greater efforts to protect and restore theenvironment. The Semipalatinsk nuclear test site wasshut down in 1991, while joint projects with the WorldBank helped to restore water to the northern part of theAral Sea.

The government is developing new laws to encourage investment in the renewable energy sector.In 2013, Kazakhstan adopted legislation that providesfor capital subsidies and establishes feed-in tariffs forfirms using renewable energy resources, which will bein place for 15 years. Together with Islamic DevelopmentBank, the country has established a renewable energyfund worth $50 million that will attract strategic investment and expertize into the renewable energysector, particularly wind, solar, biomass and smallhydro. Furthermore, in 2013, the government launcheda pilot version of the national carbon-trading scheme.



And as already stated, the World Expo in 2017 will beheld in Astana and be dedicated to the topic of “FutureEnergy.”

Agribusiness (Agriculture, Food Processing,and Food Retailing)Kazakhstan offers many opportunities for agriculturalinvestment. Over 80% of the country’s total area classified as agricultural land, 70% of which is occupiedby pasture lands. Arable land availability per inhabitant(1.5 hectares) is the second highest in the world afterAustralia (2.1 hectares). Agriculture constituted 6% ofGDP in 2013 and 1/3 of employment. After a transition-ing to a market economy after Soviet collapse, Kazakhstanmanaged to substantially increase its production andtrade capacity in agro food products, becoming one ofthe top grain exporters in the world. Russia, China andCaucasus are the major export destinations for Kaza-khstan’s wheat.

Kazakhstan’s agribusiness sector shows great growthpotential. The rapidly growing economy and increasing disposable income have translated intogrowing demand for higher value and quality foodproducts. The highly attractive end-consumer marketwill lead to advancement of a market for packagedfoods, branded products and retail private labels. Thesuppliers present in the market include The Coca-ColaCompany, Procter & Gamble, Nestle SA, and Unilever.The current undercapitalization of local players andlimited competition in the sector opens up attractiveopportunities for new entry with promising growthprospects.

In addition, the drive to increase the currently limited capacity of local suppliers will generate demandfor agricultural productivity. In 2012 and 2013, the USshipped $212.4 billion in agricultural products to Kazakhstan. Opportunities for US companies include:feeds and feed mix, pedigree animals and genetic



KazAgro

In order to promote and develop the agro-industry, in2006 the government created KazAgro, a nationalagency that encompasses different companies and affiliated structures, oversees various investments inagriculture projects, and ensures their success and sustainability. Its mission is to implement the govern-ment agriculture policies and ensure the effective management of investment assets and state resourcesby joint stock companies. It also provides budgets and

establishes a medium-term financial plan. Moreover, itis responsible for implementing efficiency norms andmanagement motivation. It also plays a major role in attracting foreign companies by providing state incentives for an eventual investment in Kazakhstan.

KazAgro reported total assets of KZT 582 billion(USD 3.2 billion) as of December 31, 2013. It consistsof several major subsidiaries – Food Contract Corporation, KazAgroFinance, Agrarian Credit Corp,KazAgroGarant, Fund of Financial Support of Agriculture, etc. The Holding is planning to sell its 48subsidiary companies during the new state program ofprivatization of state assets. The majority of them aremicro-credit organizations. The Holding has externalratings from Fitch (a long-term foreign currency rating is'BBB', a long-term local currency rating is 'BBB+' and ashort-term foreign currency rating is 'F3'. The outlooksfor the long-term ratings are stable).

material, grain infrastructure, agricultural machineryand software, farm management technologies and services, agricultural consulting services, water savingtechnologies, sustainable irrigation/water supply systemsdevelopment, and organic agriculture standards development.

Rich soil, favorable weather conditions, and a longgrowing season in the south, render Kazakhstan an attractive place for large-scale agriculture. Kazakhstanhas identified three agricultural sub-sectors with a highgrowth potential: crop production, livestock productionand infrastructure and machinery. To date, 21.3 millionsquare hectares are devoted to crop production and include a variety of products from grapes to cotton.Livestock output is constantly rising, which led to anincrease in meat, egg and milk production by 3%, 12.6%and 1.4%, respectively, between 2011 and 2012. government support to agriculture between 2009 and2011 amounted to $1.36 billion per year, according tothe OECD Producer Support Estimate.

The government has multiplied its efforts to attractlocal capital and foreign investment and knowledgeinto Kazakhstan’s agriculture sector. Among these include the provision of subsidized loans to agriculturalenterprises, subsidies for machinery upgrades and construction, state-funding of organizations developingveterinary and phytosanitary sectors, the provision ofsubsidies for industrial energy costs, waved import duties on farm equipment, raw materials and spareparts, and exemption from corporate income and property taxes.

Chemical and Petrochemical IndustriesWith vast oil reserves and raw chemical material deposits,Kazakhstan has huge growth potential in the petro-chemical industry. In 2004, the government adoptedthe “Program for development of the petrochemical industry of the Republic of Kazakhstan for 2008-2013,”pursuant to which it has started constructing the National Industrial Petrochemical Technopark inAtyrau that will convert the resources from Tengiz andKashagan oil fields to high-value petrochemical products

for export and domestic consumption. Pharmaceutical and Biotechnology IndustriesKazakhstan’s pharmaceutical market is the most accessible, transparent and, from a legislative point ofview, progressive in Central Asia. Currently, some 70%of domestically consumed medicine is imported, while30% are internally manufactured. The governmentadopted a resolution on “The State Program for the Development of Pharmaceutical Industry for 2010-2014,”with the objective of increasing domestic production ofpharmaceuticals from 30 to 50% by the end of 2014.Under the program, foreign manufactures are eligibleto obtain equal treatment with domestic ones if theydecide to produce domestically. In the future the country could leverage its favorable business environ-ment and regional ties to supply neighboring states,such as Uzbekistan, Kyrgyzstan, Turkmenistan andTajikistan, all of which have growing populations andlack domestic production capacity.

OtherUS companies that have carried out business in othersectors. Boeing sold $1.3 billion of aircrafts to Air Astana in 2012. FedEx that operates large shipping facility outside of Astana, and DHL maintains officesthroughout the country. General Electric (GE) operatesa large assembly plant in Astana, where it manufacturespassenger locomotives for the national railway company,Kazakhstan Temir Zholy (KTZ). In 2012, GE and KTZsigned an agreement worth over $90 million to equipthe Astana plant to assemble GE’s Evolution heavy-haulpassenger locomotives, which contain an advanceddiesel electric engine. These locomotives are assembledfrom components and kits manufactured in Grove Cityand Erie, Pennsylvania, supporting American jobs. U.S. companies also have a major presence in Kazakhstan’sfinancial services (Citigroup, JP Morgan, etc.), IT andtelecom (Microsoft, IBM, Cisco, etc.) and other sectors.





Astana Kazakhstan

Kazakhstan’s Partnerships for SME DevelopmentPresident Nazarbayev emphasizes the importance ofsmall and medium sized enterprises (SMEs) to Kazakhstan’s long-term, sustainable development.Under the ‘Road Map for Business 2020’, SMEs are eligible to obtain subsidized-interest loans, loan guarantees, assistance in developing production (industrial) infrastructure, services to support businesses(consulting, legal, actuarial, and other), and the trainingof personnel.

In order to accomplish national development objectives, the government has partnered with interna-tional organizations. President Nazarbayev announcedin 2014 a program allocating 1 trillion tenge ($5.5 billion)from the National Fund of Kazakhstan to support industrial policy, banking sector, and SMEs. The implementation of the program will be supported bythe Asian Development Bank (ADB), based on a frame-

work agreement on co-financing both sides signed inMay 2014 in Astana.

Kazakhstan has also been working with the EuropeanBank for Reconstruction and Development (EBRD) tosupport SMEs. The Kazakh government has provideddonor funding to the EBRD’s Small Business Support(SBS) program, which provides advisory services to enterprises throughout the country. Already, the EBRDprovided 15 billion tenge to Kazakhstan’s SMEs.

With financial support of USAID, the governmentof Kazakhstan carries out the program “Business Connections” to support Kazakh SME through arrangingfor them business missions and trainings in the UnitedStates. More than 120 Kazakh companies representingvarious industries, such as construction, pharmaceuticals,education, food processing, etc., have already became apart of the project and had a chance to meet with theirAmerican counterparts and potential business partners.



View of the President’s Palace Acorda, Astana Kazakhstan


KAZAKHSTAN-U.S. RELATIONS

Kazakhstan is the U.S.’ most reliable partner in Central Asia. Kazakhstan and the U.S.have worked together since December 1991, when the U.S. was the first country torecognize Kazakhstan’s sovereignty and independence. Since then, the two countries

have worked together on issues regarding security,energy, trade, democracy promotion and nuclear nonproliferation.

Kazakhstan-U.S. Relations

In 2010, Kazakhstan and the United States launched theAnnual Bilateral Consultations (ABC) under StrategicPartnership – a framework for cooperation on range ofissues including regional cooperation, stabilization ofAfghanistan, security, democratic reform, rule of law,human rights, civil society development, economic development, energy, science and technology, and people to people contacts. In accordance with the Action Plan, the parties created working groups thatcollaborate on the issues. The level of interaction was

raised to Strategic Partnership Dialogue (SPD) in 2012.In 2013, Washington hosted the second SPD meetingwhere the two sides recognized that significant progresshas been made in the bilateral relationship since the inaugural meeting in 2012.

Kazakhstan has worked with the U.S. to ensure stability in the region of South and Central Asia. Thecountry has supported stabilization activities inAfghanistan and fought the common regional securitythreats, including nuclear proliferation, terrorism,

trafficking in persons, narcotics, and organized crimeas well as the newly emerging ones–climate change,food security, and water security. Its efforts have contributed to stability, peace and economic prosperityof the neighboring countries.

Kazakhstan has actively supported the stabilizationof Afghanistan. The country granted overflight rights tocoalition forces during Operation Enduring Freedom(OEF) and has since allowed for continued air and landtransit for NATO and U.S. troops, equipment and suppliesto and from Afghanistan. The port of Aktau and Kazakhstan’s roads air, road and rail networks are partof the Northern Distribution Network (NDN). In addition, Kazakhstan has played an important role ineconomic recovery of Afghanistan and efforts to integratethe country into the region within the US Departmentof State’s New Silk Road Initiative. The government established a $50 million scholarship program to educate one thousand Afghan students at Kazakhstan’suniversities. It co-chaired the Istanbul Process, openeda trade office in Kabul, pledged to contributed to the

development of Afghan National Security forces $2 million, and established KazAID – an aid agency focusing on Afghanistan and Central Asia. Kazakhstanalso constructed several infrastructure projects inAfghanistan, including schools, hospitals, bridges, watersupplies and the Kunduz-Talukan road.

Threat reduction is a cornerstone of US-Kazakhstanefforts to ensure regional stability. U.S. assistance toKazakhstan under Cooperative Threat Reduction (CTR)Initiative, also known as the Nunn-Lugar Program, allowed Kazakhstan to rid itself of 1,410 nuclear warheads and eliminate its Soviet-inherited infrastruc-ture for “weapons of mass destruction.” Thanks to this,Kazakhstan signed the Nuclear-Non Proliferation Treaty(NPT) with an indefinite extension, as a non-nuclearweapons state (NNWS) – an event that was marked bythe visit of then Vice-President Al Gore to Almaty inDecember 1993. In fact, gaining the status of a NNWSwas one of its most important decisions since independence.



Kazakhstan takes a firm stand in promoting nuclear disarmament, non-proliferation, as well as control, accounting and physical security of nuclear material.Kazakhstan is a party to the Nuclear Non-ProliferationTreaty (NPT), the Comprehensive Test Ban Treaty(CTBT) and the Central Asian Nuclear Weapon FreeZone (CANWFZ). Kazakhstan is an active partner inthe Global Initiative to Combat Nuclear Terrorism,which aims to strengthen the global capacity to prevent,detect and respond to nuclear terrorism. With the strongsupport of the US, Kazakhstan is now in the final stagesof negotiating the terms of its hosting of the Interna-tional Atomic Energy Agency (IAEA) nuclear fuel bank.This bank will prevent the proliferation of nuclear

weapons by allowing countries to purchase fuel, ratherthan setting up their own enrichment plants.

In May 2006, Kazakhstan and the U.S. signed a cooperative agreement against the trafficking of radioactive and fissile materials. The U.S. helped to install fissile-detecting equipment in major bordercrossings and train local staff. Kazakhstan’s border security agencies have now increased their capabilitiesto survey, detect and interdict the passage of radioactiveand fissile materials. The Kazakhstani government hasbuilt a Training Center for Trafficking, under the Ministry of Internal Affairs, and has introduced trainingcourses for anti-money laundering/counterterrorism finance for government and non-government personnel.



Kazakhstan’s Support of Peacekeeping Operations in Iraq

In 2003, Kazakhstan sent 27 military engineers to assist coalition operations in Iraq. Over five years, ninecontingents totaling 290 Kazakh peacekeeping troopswere rotated through Iraq. Kazakhstan’s troops undertook humanitarian assistance operations, convoysecurity, perimeter and base defense activities, quick reaction force duties, traffic control point operations,

water purification, and demining. In fact, Kazakhstaniforces dismantled five million mines and explosivesduring their tenure in Iraq. Kazakhstani doctors, together with their Iraqi colleagues and other international counterparts, provided medical assistanceto more than 500 Iraqis.

In addition, Kazakhstan has improved its ability to disrupt drug trafficking origination from Afghanistanand dismantle associated criminal organization throughthe effective investigation, prosecution and convictionof traffickers. American units have also trained Kazakhcommandos to fight against insurgencies.

Kazakhstan has made strides in fighting organizedcrime and terrorism. The country annually hosts the“Steppe Eagle” joint counter-terrorism and peacekeepingexercise between Kazakh, U.S. and NATO forces. Thanksto this exercise and the military training assistanceKazakhstan receives, it has developed peacekeepingforces that are capable of carrying out missions that include working with NATO forces. Moreover, as high-lighted by the visit of U.S. Secretary of the Navy RayMabus to Kazakhstan in Jun 2012, the U.S. Navy helpedKazakhstan’s Defense Ministry to strengthen its emer-gency-response capacity in the Caspian Sea. These efforts confirm Kazakhstani government’s commitmentto ensuring regional stability through international collaboration.

Trade and Economic CooperationFor United States, Kazakhstan is a reliable partner andregional leader in Central Asia and the United States isone of the largest and fastest-growing trade partners ofKazakhstan. In 2013, the trade turnover volume betweenKazakhstan and the U.S. amounted to $2.7 billion, an increase of 9 percent as compared to the previous year.

Kazakhstan exported $1.4 billion worth of goodsand services to United States in 2013. The exports wereconcentrated in natural resources. Top exports includedoil products ($1 billion), iron and steel, uranium, tantalum and other uranium ores.

The overall volume of imports from the U.S. was$1.3 billion. Non-agricultural imports represented$882 million, a 7 percent increase from 2012, and wereconcentrated in machinery ($333 million), aircraft($204 million), electrical machinery ($127 million),vehicles ($71 million), and railway (locomotive parts)($70 million). Agricultural exports, which totaled $80million in 2013 were concentrated in poultry meat($68 million).

The U.S. is the fourth biggest foreign direct investor inKazakhstan. Since 1993 the U.S. has invested $ 25 billionin foreign direct investment. Between 2005 and 2013the US was the second largest investor in the Kazakheconomy, with majority of investment targeting the energy and mining sectors.

Kazakhstan annually hosts various investment andtrade-economic events, where Kazakhstani governmentofficials and business leaders present current and futureinvestment opportunities open to U.S. investment andestablish frameworks for future cooperation with U.S.businesses. During the investment road shows in 2012,GlaxoSmithKline, Innovaro, Transcosmos have signedmemorandums of understanding with Kazakh businesses.During Kazakhstan-U.S. Convention in 2013 the Government has officially presented EXPO-2017 andits opportunities for American energy companies.

Kazakhstan has worked with the U.S. to develop intoa prosperous market that embraces free-market competition. Under the framework of the annual bilateral consultations (ABC), founded in 2010, thathas been elevated to Strategic Partnership Dialogue in2012, Kazakhstan and the Obama Administration focuson creation of favorable conditions for the developmentof investment and trade as well as economic develop-ment more broadly. The U.S. has pledged to supportKazakhstan in its effort to obtain the WTO membershipand to deepen trade and investment ties, particularly inthe sectors prioritized by Kazakhstan Strategy 2050.

Kazakhstan works closely with the United States tosupport its leadership role in economic developmentefforts in the Central Asia region. Together with Kyrgyzstan, Turkmenistan, Tajikistan, Uzbekistan, andAfghanistan the countries established the UnitedStates-Central Asia Trade and Investment Framework(TIFA) in 2004. In 2014, at the 9th Council Meeting,the countries focused on advancing accession of thecountries into WTO, customs, investment, standards,and sanitary measures coordination, as well as procurement.

The United States pays great attention to energy cooperation and has supported Kazakhstan in its efforts



to increase its role in ensuring global energy security.The Energy Partnership Commission that was establishedin 2003, plays an important role in coordinating energycooperation between the countries. At the 10th AnnualMeeting of the Commission in 2014 the countriesagreed to continue promoting cooperation in four broadareas: nuclear security, hydrocarbon resources, renew-able energy and energy efficiency, and electric power.In the context of Kazakhstan’s plan to transition towardsGreen Economy, the countries have established a permanent expert dialogue and advanced implementa-tion of renewable energy, energy efficiency, and cleanenergy projects.

The U.S. has actively promoted diversification ofpipeline export-routes in the Caspian Sea region, inorder to increase the energy security of consumers inEurope and the Middle East and to diversify the marketopportunities for Kazakhstani exporters. With Americansupport, Kazakhstan signed an agreement with

Azerbaijan in June 2006 to transport oil through theBaku-Tbilisi-Ceyhan (BTC) pipeline. For Kazakhstan,this agreement was necessary to safeguard its exportmarkets due to Russia’s refusal to increase the trans-portation capacity of the Caspian Pipeline Consortium(CPC) and the BTC’s capacity to handle increased production.

Since 2006 Kazakhstan has been co-funding programs under USAID’s Economic Development Program jointly with USAID, demonstrating country’sinterest in USAID’s expertise and support in developingsmall and medium enterprises, economic reforms, andregional trade. For the year 2014, programs targetingdevelopment of small businesses, foreign investment attraction and energy efficiency increase were allocatedaround $4.1 million. Kazakhstan received approximately$2 billion of all-agency funding from the U.S. between1993 and 2012.



25%20%15%10%

5%0%

China Russia Italy Netherlands France

TOP 5 EXPORT DESTINATIONS OF KAZAKHSTAN– 2013

30%20%10%0%

ChinaRussia Ukraine Germany U.S.

40%

TOP 5 IMPORT DESTINATIONS OF KAZAKHSTAN– 2013

Another prominent initiative is the Science and Technology Commission which was launched June 24-25, 2013, in Astana by the U.S. State Department andthe Ministry of Education and Science of Kazakhstan.By creating a dialogue platform with several workinggroups (biomedical partnership, disease control, peerreview, innovations, etc.) Kazakhstan and the UnitedStates affirm their commitment to strengthen scientificand technical cooperation between scientists, engineers,and students at research institutes and in the privatesector.

In addition to the Science and Technology Commission, the United States welcomes Kazakhstan’sclimate change initiatives such as the “Green BridgeInitiative” officially presented during “RIO+20” UNConference and “EXPO 2017”, where the U.S. will behosting its own pavilion. The United States highly appreciates the decision of Kazakhstan to host the

International Science and Technology Center (ISTC)headquarters office in Astana.

The New Silk Road initiativeKazakhstan-U.S. economic ties are set to grow in thenear future with the State Department-backed NewSilk Road initiative for Central Asia and Afghanistan. Itaims to use energy, transport, trade, and infrastructureprojects to integrate the region, provide regional stability and boost its potential as a transit area betweenEurope and East Asia.

South and Central Asia remains one of the leasteconomically integrated regions in the world, presentingan untapped opportunity for investment. As such, theinitiative targets to improve this by accelerating theflow of goods, services and people throughout the regionto promote cross-border collaboration and trade.



Kazakhstan’s Graduation From Jackson-Vanik Amendment

The Jackson-Vanik Amendment, passed in 1974, is a series of trade restrictions linked to human rights issues,particularly discriminatory emigration. Under the law,the U.S. denies the most favored nation (MFN) andnormal trade relation statuses’ to countries that do notextend their citizens the right of freedom of emigration.Originally passed to punish Soviet Union for thwartingefforts of the Jewish population to emigrate, the legislation enabled 100,000 Jews to leave the SovietUnion over the next decade. Yet, almost three decadeslater, the Soviet Union is gone, and the legislation remains in force, obstructing trade relations betweenthe U.S. and Kazakhstan.

While each year the U.S. President reviews compliance with the amendment and renews an extension of the Jackson-Vanik waiver for Kazakhstan,it is the official position of the Republic of Kazakhstanthat it should receive a permanent exemption.

Jackson-Vanik-related restrictions on trade are relics ofthe Cold War that are not applicable to current emigration policies or to the treatment of religiousgroups in Kazakhstan. Kazakhstan has earned interna-tional recognition for its promotion of freedom of religion and support for efforts to tackle racial and religious intolerance and discrimination both on domestic and international levels.

Kazakhstan has been a strong and reliable partnerof the US in security, energy, and trade, and has indicatedwillingness to cooperate on issues like agricultural imports and the protection of intellectual propertyrights. Jackson-Vanik is incompatible with WTO rules,so when Kazakhstan gains WTO accession, U.S. businesses will not be able to take advantage of associated lowered tariffs and trade-promotion benefitsgranted to WTO members. The U.S.’ permanent graduation of Kazakhstan from Jackson-Vanik andrecognition of Kazakhstan as an equal trading partnerwould boost bilateral trade volumes and would send asignal to the global market that the two countries arecommitted to further deepening their ties.


REGIONAL RELATIONS

Foreign PolicyKazakhstan’s foreign policy is based on the understanding that it is a large country with

roots in both Europe and Asia; its interests are many. As a land-locked state, Kazakhstan has a multi-vectored foreign policy that emphasizes the creation of strong, long-lasting alliances and strategic partnerships.

Regional Relations

Kazakhstan has good relationships with the UnitedStates, Russia, China, Central Asian states, as well aswith many other European and Asian countries. Kaza-khstan has long-standing historical ties and vast sharedborders with China and Russia. China’s pursuit of en-ergy security and new markets has strengthened its tiesto Kazakhstan’s economy; Chinese-Kazakhstan eco-nomic cooperation will continue.

Kazakhstan is a member of the Commonwealth ofIndependent States (CIS), the Eurasian Economic

Union (EEU), Central Asian Regional Economic Coop-eration (CAREC), and the Shanghai Cooperation Organ-ization. In 2010, it became the first Central Asian,post-Soviet and predominantly Muslim country to chairthe Organization for Security and Cooperation in Eu-rope (OSCE), the world's largest security oriented inter-governmental organization. In 2011, Kazakhstan chairedthe Council of Foreign Ministers of the Organization ofIslamic Cooperation (OIC). Among its current foreignpolicy priorities, Kazakhstan seeks a non-permanent

member seat (2017-2018) on the UN Security Council. The motto of Kazakhstan’s OSCE chairmanship was

“Four Ts”. The first T refers to trust. The second, ‘tradition’, refers to Kazakhstan’s commitment to thefundamental principles and values of the OSCE. Thethird, ‘transparency’, conveys maximum openness in international relations, free from ‘double standards’ and‘dividing lines’, as well as a focus on constructive cooperation in order to reconcile security threats. TheU.S. supported Kazakhstan’s OSCE chairmanship. On 20January 2010, in his remarks on The Occasion of theCommencement of Kazakhstan’s OSCE Chairmanship,then Assistant Secretary of State for South and CentralAsian Affairs, Robert Blake, said: “As Kazakhstan beginsto serve as the chairman-in-office of the Organizationfor Security and Cooperation in Europe this year, it ischarting a course for a bright and promising future. It isa future in which the United States and Kazakhstan together seek peace, security, economic developmentand prosperity.”

A leader in regional security cooperationKazakhstan’s leadership in regional security cooperationhas contributed to the stability, peace and economicprosperity of the neighboring countries. The country hassupported stabilization activities in Afghanistan andfought the common regional security threats, includingnuclear proliferation, terrorism, trafficking in persons,narcotics, and organized crime as well as the newlyemerging ones – climate change, food security, andwater security. Kazakhstan has also worked with the U.S.since independence in 1991 to advance the country’s capabilities to tackle these threats and ensure regionalstability.

Kazakhstan’s UNSC CandidacyKazakhstan submitted a bid for 2017-2018 membershipin the United Nations Security Council (UNSC) whereit plans to engage countries on the problems of food,water and energy security – issues that are on Kazakhstan’slong-term foreign policy agenda. The bid was submittedby Kazakhstan after having chaired the OSCE in 2010and the OIC in 2011. Both of these chairmanship terms

have enabled Kazakhstan to demonstrate its leadershipabilities on the international stage and its capabilities toeffectively address critical issues.

Relations with RussiaAs a former Soviet Republic, Kazakhstan retains manyeconomic and political connections with Russia – fromelectricity grids, to industrial processes and railroadtracks. Still, Kazakhstan has prioritized its own nationalpolicymaking and is a sovereign, independent actor inregional and global affairs.

Russia’s location and size make it an inevitable trading partner with Kazakhstan. Kazakhstani and Russian consumers share linguistic, historical and cultural ties and have similar tastes in consumer goods.It is only natural that Russia is Kazakhstan’s largest trading partner. But this does not mean that Russia isKazakhstan’s only partner. As this report illustrates,Kazakhstan pursues partnerships with all nations in the world.

The events in Ukraine are of great concern to Kazakhstan. While some analysts compare Russia andKazakhstan to Russia’s relationship with Ukraine, thisanalogy is not accurate and there are significant differ-ences between the two countries’ situations. For hundredsof years in history, Eastern Ukraine has been a subject ofcontention between Moscow and Kiev, while there areno territories in Kazakhstan that are nearly as contestedby two different parties. At the same time, Kazakhstanrecognizes its 20% Russian ethnic minority and continues to provide this community with the samerights and privileges as any other ethnic group.Nazarbayev emphasizes the value of Kazakhstan’s ethnicdiversity and maintaining an inclusive, pluralistic political and economic environment.

Eurasian Economic Union (EEU) and Customs UnionThe Eurasian Economic Union represents the openingof new economic opportunities without sacrificing political independence. Kazakhstan’s partnership withRussia and Belarus in the joint Customs Union and,now, the EEU is in line with the multi-vector foreign


REGIONAL RELATIONS

policy. This economic partnership also serves to balanceKazakhstan’s relationship with China. Economic ties between Kazakhstan and China are naturally growing soensuring that Kazakhstan is not overly reliant on anyone country is a prudent goal.

Regional Security, Terrorism and Iran’s Nuclear ProgramKazakhstan has been a reliable partner with the US inefforts to maintain or improve regional stability, as wellas combat terrorism. The country has worked tirelesslyto assist the stabilization and rebuilding of Afghanistan,taking a leading role among the Central Asian states.Kazakhstan has been consistently supportive of ISAFand NATO forces in Afghanistan and has facilitatedtransit for troops and supplies on a regular basis. As anearby country, Kazakhstan is in favor of a comprehen-sive, sustainable solution to Afghanistan’s issues and remains committed to such a resolution.

During the chairmanship in the Organization forSecurity and Cooperation in Europe in 2010, Kazakhstanhas allocated $ 50 million for education of Afghan citizens in Kazakh universities and developed a programto promote the peaceful development of the IRA.

The issue of Iran’s nuclear program is also of greatconcern to Kazakhstan. The country’s historic role in reducing nuclear arms directly informs Kazakhstan’sconcern about Iran’s nuclear program, which remains amajor concern as it affects both regional and global security. As a sign of Kazakhstan’s commitment to re-solving this issue, the country hosted P5+1 talks in early2013 in Almaty.

As the President of the Republic of Kazakhstan Nursultan Nazarbayev said during the Nuclear SecuritySummit in the Hague (Netherlands) on March 24, 2014the adoption of a UN Universal Declaration on theachievement of a nuclear weapons free world will promote the advancement of the Convention on Fulland Total Ban of Nuclear Weapons.

Countering nuclear terrorism measures need to betaken to ensure the integrity of the processes of extraction,production, storage, transportation, and use of nuclearmaterials.

Relations with other Central Asian statesKazakhstan also has strong alliances with its CentralAsian neighbors. Since independence, Kazakhstan hasworked to create regional economic alliances, includingwith the Commonwealth of Independent States,Eurasian Economic Association, Central Asian EconomicAssociation and Shanghai Cooperation Organization.

The country’s position as a leading exporter of grainand flour lends it to addressing the regional issue of foodsecurity. As such, the Kazakhstan Agency for Interna-tional Development, or KazAID, is currently being developed as part of a larger initiative to make Almaty –the country’s largest city and former capital – a regionalfocus point for multilateral diplomacy.

President Nazarbayev helped Kazakhstan establishthe Conference on Interaction and Confidence-buildingmeasures in Asia (CICA) in order to strengthen regionalsecurity and cooperation. Regular summits have takenplace that have affirmed the sovereignty of its 26 member-countries of Asia and the Middle East, as wellas cooperative security efforts.

ChinaChina is a growing economic partner with Kazakhstan,a fact underlined by the construction of a new oilpipeline from Kazakhstan to Western China last yearand completing next year Western Europe-WesternChina highway to develop trade and economic ties.These economic ties form the core of Kazakhstan’s relations with its eastern neighbor.

Additionally, China and Kazakhstan have worked together as regional partners and both countries co-founded the Shanghai Cooperation Organization.This group focuses on regional security, economic development, and fighting terrorism and drug traffickingin Central Asia. In developing such ties with China,Kazakhstan is balancing the geopolitical and economicinfluence of Russia, as well.

A dynamic and multi-vectored foreign policySince Kazakhstan’s independence from the SovietUnion, President Nazarbayev has vigorously put in placeforeign policies that have contributed to Kazakhstan‘s


REGIONAL RELATIONS

diplomatic and economic expansion. Already activelyparticipating in nuclear non-proliferation programs,Kazakhstan has been permanently engaged from thevery beginning in the work of the Nuclear SecuritySummits and joined the latest one on March 24, 2014 inThe Hague to help improve further international cooperation on nuclear security and examine theUkrainian conflict. Moreover, Kazakhstan helped launchthe CICA (Conference on Interaction and Confidence-building measures in Asia) to promote peace and security in Asian territory, an initiative proposed byNazarbayev in October 1992 at the UNGA’s 47th meeting. Furthermore, Kazakhstan’s integration to theEEU in 2015 will provide geographical enlargement aswell as expand economic and diplomatic horizons.

In the international arena, Kazakhstan has developednumerous partnerships that enhanced its multi-vectoredand competitive environment. The EU and U.S. havebeen great contributors to the development, moderniza-

tion and democratization of Kazakhstan. Between Kazakhstan and the EU, the country’s biggest trade partner as a bloc, trade accounts for $50 billion or 54%of overall trade. For many years, the country has alsobuilt stable relations with Russia. China has recently become an important diplomatic and trading partner ofKazakhstan, developing a current total trade of $24 billion, a number expected to rise to $40 billion by2020. Moreover, Kazakhstan is now in the process ofimproving relationships with Latin America (especiallyBrazil, Mexico, Argentina and Chile) in the sectors ofagriculture, meat industry and renewable energy.

In order to increase and improve its diplomatic relations, Kazakhstan has opened its borders with a visa-free policy to ten nations that invest heavily in thecountry. Negotiations are now in process to develop mutual bilateral agreements to facilitate visa proceduresfor Kazakh citizens looking to travel visa-free to Europeand some Asian countries.


Looking Ahead to a Bright FutureSince gaining independence in 1991, Kazakhstan has arecord to be proud of. It has settled its borders with itsvast neighbors. It has strengthened its external securitywith a shrewd foreign policy that has forged close tieswith Russia, China, the United States and Europe simultaneously. It has achieved an unprecedented degree of inter-ethnic harmony, thereby laying thefoundation for internal stability. By staying faithful tothe strategy of putting the economy and stability first,the government has been able to unveil a series of important democratic reforms that will in time lead toa fully-fledged democratic state.

Yet this success is not limited to its own borders.Untold numbers of foreign companies and individualshave benefitted from investing in Kazakhstan over thepast 20 years, reaping their own benefits as the countrycontinues its strong growth.

To that end, Kazakhstan will have even more potential as it moves towards its 2050 developmentgoals. The expansion of industrialization will includecutting-edge trends, such as in information technologyand biotech, will require foreign expertise, creatingnew opportunities for overseas corporations in a fast-growing emerging market. Kazakhstan’s burgeoning

middle class also represents a new market for anynumber of agricultural and consumer companies as demand for higher-quality products rises. The country’sposition as the economic leader of Central Asia is unrivalled, offering yet more opportunities for investorsas the region as a whole continues to develop on theback on its bountiful natural resources.

Kazakhstan’s commitment to tolerance, diversityand democracy will continue to be a cornerstone of thecountry’s strategy. This belief is not merely windowdressing - Kazakhstan has chosen to become a democ-racy because it is the best way to run the society, ensurethe prosperity of the people and guarantee the long-termsecurity of the state. A large and stable democracy inthe heart of Central Asia is a positive thing for Kazakhsand their Western allies.

In short, the future for Kazakhstan is bright andonly made brighter by the opportunities it allows forothers around the world to benefit, as well. Havingbeen a dedicated partner with Kazakhstan since its independence, the United States is well-positioned tooptimize Kazakhstan as an export and investment market.At a time when investment overseas is fraught withdeep-seated economic and political risks, there is noshortage of potential for U.S.-Kazakh partnerships.


LOOKING AHEAD TO A BRIGHT FUTURE

Cultural Center and majestic mosque “Hazret Sultan” in Astana Kazakhstan.

www.trevianinternational.com

an introduction to kazakhstan for american businesses

Investor Relations