Foreign investors show cautious optimism toward investments in Kazakhstan

May 28, 1999 02:00 AM

Foreign investors are showing cautious optimism toward sustained and larger investments in the Republic of Kazakhstan, according to findings of a new comparative survey of foreign investors in Azerbaijan, Kazakhstan, Russia, Ukraine, and Uzbekistan released by the International Tax and Investment Centre (ITIC).
According to the survey, almost 40 % of investors surveyed are planning to make investments into the Kazakh economy in excess of $ 500 mm. By comparison, only 18 % of contemplated investment projects exceed $ 500 mm in Russia, the second ranked country in the survey.
"The fact that some investors are planning to increase their investments in the range of $ 100 mm to over $ 500 mm shows that in Kazakhstan investors continue to believe there is sufficient justification for future investment," stated Douglas Townsend, ITIC senior advisor and former Australian Ambassador to the Republic of Kazakhstan. "This data contradicts the fears in the aftermath of the August 1998 Russian crisis that economic instability in all of the CIS Republics would be accompanied by reduced foreign and local investment."

The ITIC survey also showed that in Kazakhstan almost 40 % of the respondents were positive towards the investment climate. This represents the strongest positive views toward a country's investment climate among all of the CIS republics surveyed. In comparison to other CIS nations, Kazakhstan received high marks from investors for its legal system, tax and fiscal regime, and political stability. However, investors continue to cite bureaucracy and corruption as significant barriers to investment in the country.
"Based on the comparative macroeconomic data, Kazakhstan has demonstrated quite stable and balanced performance over the last year," said ITIC President Daniel A. Witt. "And the volume of Kazakhstan's annual inflow of foreign direct investment (FDI) is, by far, the most impressive of all economies represented in the survey."
"However, many foreign investors reported anecdotally that several major issues such as the country's VAT policy, aggressive tax collection procedures and the fairness of the judicial system, among many others, need urgent attention by the Government," added Witt.

ITIC surveyed 139 non-CIS companies from February to May 1999. Sixty-four of the companies surveyed were doing business in the Republic of Kazakhstan. The size of investment of the responding companies range from US. $ 100,000 to over $ 500 mm, with the median being companies in the range of US $ 10 mm to US $ 50 mm. The respondents represented companies doing business in all major sectors of the Kazakh economy, including oil and gas, mining/geology, manufacturing/processing, transportation, consumer products, trading/imports/exports, services (including accounting and law), construction, and food products/agro business.
The investor's survey was also accompanied by a comparative tax study that provides a "snapshot" of macroeconomic data, fiscal policies, and key indicators in each of the five countries. The aim of the study was to provide relevant and adequate information in easy to use format to governments, parliaments, and investors in the referenced countries to evaluate the conditions for investment and fiscal reform.
"We hope that the comparative study and investment survey will provide a road map for governments and parliaments to further develop reforms to successfully compete for capital investment in a global economy," stated co- authors Douglas Townsend and Daniel Witt.

The ITIC is an independent, non-profit research and education foundation serving as a clearinghouse for information and a training centre to transfer Western taxation and investment know-how to improve the investment climate in transition countries, particularly the CIS, thereby spurring business formation and economic prosperity. Established in 1993, the ITIC is headquartered in Washington, DC with offices in Russia, Kazakhstan and the United Kingdom.

Source: International Tax and Investment Centre
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