Mukhtar Tileuberdi. Kazakhstan’s Economic Diplomacy in Action

Mukhtar TILEUBERDI, First Deputy Minister of Foreign Affairs of the Republic of Kazakhstan

Kazakhstan's Economic Diplomacy in Action

Astana, 22 June 2017. (Akorda.kz)

Strengthening of economic diplomacy became a priority of the Ministry of Foreign Affairs in light of the implementation of the tasks of President of Kazakhstan Nursultan Nazarbayev and other strategic programme documents of the Republic of Kazakhstan. In his address “New Development Opportunities under the Fourth Industrial Revolution" on Jan. 10, President Nazarbayev underlined 10 main tasks aimed at the further industrialisation of Kazakhstan.

He noted that further advancement of the manufacturing sector and introduction and wide application of modern, especially digital, technologies are the main stabilising factors of the national economy. A number of initiatives have been proposed for the technological re-equipment of basic industries with regard to human capital, upgrading of digital, transport and logistics infrastructure and national Industry 4.0 technologies, as well as instructions given for improving regulatory framework, financial and other incentive measures.

These areas are directly bound with the activities of our ministry, since the implementation of these tasks requires appropriate foreign policy.

The President Nazarbayev personally focuses on the elaboration of economic diplomacy. Virtually all his official visits involve separate meetings with foreign business communities and the conclusion of commercial agreements.

For instance, investment and trade agreements exceeding $6 billion were signed within the framework of the President's visits in 2016-2017 (to Azerbaijan, Belarus, Iran, Japan, Russia, Saudi Arabia, South Korea, Turkey, the United Arab Emirates, Uzbekistan, etc.).

A number of high-level visits were made in the first quarter of 2018, in particular to the United States and the United Arab Emirates (UAE). The Presidents of Tajikistan and Uzbekistan visited Astana in March. As a result of the negotiations, more than 50 documents worth over $15 billion have been signed.

The Ministry of Foreign Affairs of the Republic of Kazakhstan constantly monitors the implementation of agreements reached during the visits of President Nazarbayev and visits of heads of foreign states to Kazakhstan. Special attention is given to agreements with transnational corporations on joint investment projects.

The results of activities aimed at the attraction of foreign investors show that foreign partners are interested in joint implementation of investment projects in Kazakhstan. A number of investment projects have already been implemented in our country due to the participation and assistance of Kazakhstan's foreign missions. These include joint projects with such large international companies as Airbus, Alstom, Heidelberg Cement, Metro Cash and Carry, Polpharma, Talgo and many others.

For investors implementing projects in priority sectors of the economy – metallurgy, oil refining, mechanic engineering, chemical industry and food production – a number of investment benefits and preferences are envisaged. Among them are exemption from customs duties, state in-kind grants (land plots, buildings, etc.) and others.

A favourable investment climate generates interest in cooperation with our country. This is proven by international ratings. Kazakhstan ranks 36th in Doing Business 2018 and first in terms of protecting minority investors out of 190 countries of the world. In the Global Competitiveness Index 2017 of the World Economic Forum (WEF), Kazakhstan ranked 57th in the overall index.

Today, Kazakhstan is represented in the Investment Committee of the Organisation for Economic Cooperation and Development (OECD) as an associate and joined the OECD Declaration on International Investment and Multinational Enterprises. The OECD standards are the target indicators for Kazakhstan's entry into the list of the 30 most developed countries in the world.

According to the National Bank of the Republic of Kazakhstan, Kazakhstan attracted $264.4 billion of foreign direct investments from 2005-2017.

Speaking about the investment climate in Kazakhstan, it is worth mentioning the quite liberal visa policy of our country that opens up favourable conditions for businesspeople and tourists. On Jan. 1, 2017, a visa-free regime was introduced for entry into Kazakhstan for 30 calendar days to citizens of 45 countries (countries of the European Union and the OECD, Malaysia, Monaco, Singapore and the UAE). There is a mutual visa-free regime with 20 countries. Within the Digital Kazakhstan programme, we studied international experience and this year we are already planning to introduce pilot projects of electronic visas for a number of countries.

Economic Diplomacy Tools

The Ministry of Foreign Affairs is actively involved in and facilitates the activities of dialogue platforms in the investment sector, in particular, the Council of Foreign Investors under the President of the Republic of Kazakhstan, Council on Improvement of Investment Climate under the Prime Minister of the Republic of Kazakhstan, Governmental Council on Investor Attraction (investment office) and Investment Ombudsperson.

Effective inter-agency cooperation is an important factor. The Foreign Ministry adopted joint action plans with the Ministry of Investment and Development of the Republic of Kazakhstan on strengthening cooperation in promoting export of Kazakh products, with the Ministry of Agriculture of the Republic of Kazakhstan on strengthening cooperation on attracting foreign investment in the agribusiness of Kazakhstan and developing trade and with the Ministry of Defense and Aerospace Industry of the Republic of Kazakhstan on strengthening cooperation in promoting export of Kazakh defence products and attracting investment, as well as with the Ministry of Culture and Sports of the Republic of Kazakhstan and Kazakh Tourism on issues of interaction in the field of tourism. We signed a Memorandum of Understanding and Cooperation with Kazakh Invest and approved a Joint Outreach Plan for Foreign Countries for 2017.

Next is a joint document with Kazakh Export (export insurance company) on the promotion of Kazakhstan's export of goods, works and services to foreign markets, which is expected to be signed in the near future.

We keep coordinating the concerted activity of all state agencies and organisations at the external economic level. To do this, the full potential of the foreign policy agency is involved, including foreign missions that play an important role of the first contact person and the link with the foreign business community.

Investment and export work is under special control in each embassy of Kazakhstan abroad. Heads of foreign missions keep direct dialogue with the foreign business community, hold regular meetings and negotiations with the heads of foreign companies and organise visits of business delegations.

At present, a solid institutional network has been created to help strengthen and expand bilateral trade and economic cooperation at the state level. There are 133 agencies, including 60 intergovernmental commissions, 22 sub-commissions and 51 working groups with foreign countries in a number of sectoral areas. Business circles of Kazakhstan established business councils with more than 20 countries. These platforms are an effective mechanism for Kazakhstan's cooperation with foreign partners.

To strengthen the work on attracting investments at the external level, a network of investment advisers is being deployed in 10 priority countries (China, France, Germany, India, Iran, Italy, Japan, South Korea, the U.K. and the USA) for targeted activities with investors.

I would like to particularly note that with the support of the World Bank, last year the National Strategy on Investment Promotion was developed and adopted, which is designed to define clear mechanisms for coordination of all state agencies and national companies, the order and algorithm of their interaction and targeted sources of investments, as well as measures for further improvement of the investment climate in accordance with OECD recommendations.

These measures are supported by institutional changes. In order to improve the interaction of investors with the government sector, Kazakh Invest, a specialised national investment company, which has broad powers to provide relevant public services, has been established.

This company acts as a common negotiator with transport network companies (TNCs) and large investors on behalf of the Government of the Republic of Kazakhstan and works with investors on the one-stop shop principle, including support in interaction with state agencies and solving emerging issues on the ground.

To expand cooperation with foreign investors, front offices of Kazakh Invest were opened in China, France, Germany, Turkey, the UAE, the U.K. and the USA.

The Government also approved the National Export Strategy, which aims to form a common integral policy to implement a set of measures to promote Kazakhstan's non-commodity exports.

To implement the strategy, Kazakh Export operates for the promotion of Kazakh goods and services to foreign markets. The task of this company is to support the export of non-commodities and services of Kazakh companies in priority sectors of the economy through financial and insurance support measures. The Atameken National Chamber of Entrepreneurs uses non-financial support tools for exporters.

In this context, the Foreign Ministry continues to provide direct assistance to domestic companies interested in attracting investments or promoting their products for export. Special attention is paid to small and medium-sized enterprises as the most important drivers of the economy.

In addition, I would like to note the activities of Kazakh Tourism, which will contribute to improving the competitiveness of the national tourist products of Kazakhstan and its effective promotion in the international tourist market.

The Government adopted the Memorandum for the Development of the Tourism Industry of the Republic of Kazakhstan until 2023, which aims to create a highly efficient, competitive tourism industry integrated into the world tourist market. It will be implemented in two stages: 2018-2020 and 2021-2023. By 2023, Kazakh Tourism should become a key tourism organisation, effectively promoting the tourism brand of Kazakhstan and helping to generate investment in the industry.

The Foreign Ministry also ensures the regular participation of foreign companies in investment business forums in all regions of the country. We also provide a platform for meetings with foreign diplomatic corps accredited in our country and the foreign business community. Their goal is to hold briefings, exchange views, and practical recommendations on specific issues and areas of Kazakhstan's development.

One of the priorities of the Foreign Ministry is to maximise participation of foreign investors in privatisation in conformity with the 2016-2020 Comprehensive Plan. The Ministry of Foreign Affairs of the Republic of Kazakhstan widely informs potential foreign investors about privatisation.

Multilateral Economic Diplomacy

Multilateral economic cooperation, especially with international financial organisations where our country upholds its interests, plays a major role in Kazakhstan's economic diplomacy.

The Ministry of Foreign Affairs provides the necessary assistance to Kazakhstan's state agencies in cooperation with the Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, International Monetary Fund and World Bank Group.

The OECD management pays special attention to Kazakhstan and assists Kazakh state agencies in the social and economic reforming of the country. Kazakhstan actively participates in 34 OECD working bodies (invitee in 22 bodies, participant in seven committees and working bodies, partner in four, and associate in one).

As it is known, Kazakhstan is the largest landlocked country. It is clear that the promotion of transit and transport potential and connectivity of our country and region with the world are important prerequisites for foreign investment, since this affects the efficiency of product export.

To develop national transit and transport potential, work is carried out both with governmental and business circles of foreign countries, as well as with the diplomatic corps in Kazakhstan.

The outcomes of this work are reflected in statistics. Thus, in 2017, the total transit traffic amounted to 347,500 TEUs (twenty-foot equivalent unit – standard unit of cargo capacity), which is 30 percent more than in 2016. By 2020, Kazakhstan plans to increase the transit traffic to two million TEUs.

At year-end 2016, Kazakhstan climbed to 77th place and set an ambitious goal to join the top 40 countries of the Logistics Performance Index by 2020. This became possible due to the projects of the Western Europe-Western China international transport corridor with access to the port of Lianyungang (China), the railway corridor Kazakhstan-Turkmenistan-Iran with access to the port of Bandar Abbas (Iran), etc.

It is clear that successfully engaging investors largely depends on the development level of the financial sector, which must meet world standards and be favourable and understandable for business players. Therefore, at the initiative of President Nazarbayev, the Astana International Financial Centre (AIFC) started to function in the capital city on Jan. 1, 2018.

The AIFC operates following English law, with preferential tax treatment, an independent financial court, arbitration and a regulator, which corresponds to the experience of such recognised financial centres as Dubai and London. To date, a number of agreements have been signed between the AIFC administration and the leading players of the global financial market (NASDAQ Stock Market, Shanghai Stock Exchange, etc.) In order to develop the asset management market, we streamlined the systemic exchange of information with the leaders of American, European, Islamic and Japanese investment banking, such as Credit Suisse, Deutsche Bank, Goldman Sachs, Julius Bär, UBS, etc. The presentation of the AIFC will be held in July 2018.

The AIFC and two other ambitious projects – the International Centre for Green Technologies and Investment Projects, as well as the International Park of IT Startups, are the legacy of EXPO 2017.

We are ready to cooperate with our foreign partners as part of the AIFC, the Centre for Green Technologies and the International Park of IT Startups, designed to become a new growth point of our country.

Kazakhstan's ODA System

For several years, the Republic of Kazakhstan has been focusing on the development of its own Official Development Assistance (ODA) system. In particular, we have adopted the law on ODA and a number of legal acts have created human resources potential and have been developing cooperation with donor organisations.

Currently, active work is underway to create a national ODA operator called KazAID. Nevertheless, we have already started practical implementation of the first projects under the auspices of the national ODA system in cooperation with United Nations Development Programme (UNDP) and other donors. The first pilot project, a scientific and practical workshop on Improving the Productivity and Profitability of Agribusiness through Teaching Innovative Technologies of Water and Energy Saving to Farmers and Agricultural Specialists of Central Asian Countries, was held in Astana and Almaty from April 24-28, 2017.

Moreover, as part of Kazakhstan's ODA, the Promoting Kazakhstan's ODA Cooperation with Afghanistan project was implemented in cooperation with the UNDP and the Ministry of Foreign Affairs of Japan.

The agreement on the implementation of this project was reflected in the Joint Statement of the President of Kazakhstan and the head of the Japanese government, adopted during the visit of Prime Minister Shinzo Abe to Kazakhstan in October 2015.

This project was aimed at strengthening the economic independence of Afghan women and provided for the training of citizens of this country in Kazakhstan on such areas important for Afghanistan as public administration and healthcare, with a special focus on maternal and child health. Kazakhstan's participation in the project was expressed in the form of the transfer of experience and knowledge of leading specialised organisations, as well as of individual Kazakh experts.

Overall, the foreign economic objectives outlined by the country's leadership define the whole range of activities of the Ministry of Foreign Affairs. In promoting economic diplomacy and generating foreign investment, the Foreign Ministry acts as an important link between the national business community and external partners. This multifaceted work will be continued and strengthened

Created at : 8.06.2018, 11:15, Updated at : 8.06.2018, 11:15