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UNCLAS SECTION 01 OF 27 ASTANA 000044 
 
SIPDIS 
 
STATE FOR SCA/CEN, EB/IFD/OIA, OPIC 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: PGOV EINV EFIN ETRD ELAB EPET KTDB OPIC USTR KZ
SUBJECT:  KAZAKHSTAN:  INVESTMENT CLIMATE STATEMENT 2010 
 
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REFTEL:  09 SECSTATE 124006 
 
¶1.  The following is Post's submission for the 2010 Investment 
Climate Statement for Kazakhstan. 
 
A.1. Openness to Foreign Investment 
 
Kazakhstan has made significant progress toward creating a market 
economy since gaining independence in 1991.  The European Union in 
2000 and the U.S. Department of Commerce in March 2002 recognized 
the success of Kazakhstan's reforms by granting it market-economy 
status.  Kazakhstan also has attracted significant foreign 
investment since independence.  By July 2009, foreign investors had 
invested a total of $97.6 billion in Kazakhstan, primarily in the 
oil and gas sector.  In 2008, during a severe economic crisis, 
Kazakhstan still managed to attract $20.1 billion in foreign direct 
investment. 
 
Despite continuously increasing investment in Kazakhstan's energy 
sector, concerns remain about the government's tendency to challenge 
contractual rights, legislate preferences for domestic companies, 
and create mechanisms for government intervention in foreign 
companies' operations, particularly procurement decisions. Together 
with vague and contradictory legal provisions that are often 
arbitrarily and inconsistently enforced, these negative tendencies 
feed a perception that Kazakhstan is less than fully open to 
investment. 
 
Four major acts of legislation affect foreign investment in 
Kazakhstan. These are: 1) the 2003 law "On Investment"; 2) the 2003 
Customs Code and the Customs Code of the Customs Union, expected to 
be approved by July 2010; 3) the 2007 law "On Government 
Procurement," with 2008 amendments; and 4) the 2008 Tax Code.  These 
four laws provide for non-expropriation; currency convertibility; 
guarantees of legal stability; transparent government procurement; 
and incentives in certain priority sectors.  However, inconsistent 
implementation of these laws and regulations at all levels of the 
government remains a significant obstacle to business in Kazakhstan. 
 
 
The government's Program on Accelerated Industrial Development, 
which is expected to be approved early in 2010, will also play a key 
role in determining the country's investment priorities.  Beginning 
in 2010, Kazakhstan will move to a five-year investment planning 
schedule, which will be the country's first long-term economic 
development plan. 
 
In public procurement, the government has enacted regulations that 
give preference to local suppliers.  For example, amendments passed 
in 1999 to the Petroleum Law require mining and oil companies to use 
local goods and services.  According to these "local content" 
regulations, subsurface users in Kazakhstan are obligated to 
purchase goods and services from Kazakhstan entities -- provided 
that the local goods meet minimum project standards -- and to give 
preference to the employment of local personnel.  Prospective 
subsurface users are required to specify in their tenders the 
anticipated local content of their work, goods, and services (see 
Section A.5. Performance Requirement/Incentives).  Current 
procurement regulations include three sets of rules -- 2007 
Subsurface Procurement, State Procurement, and 2009 Samruk 
Procurement -- that presuppose a nominal reduction of bid price by 
Kazakhstani producers of 20%, 10%, and 10%, respectively.  In 
essence, this assumption makes local products more cost competitive. 
 However, since existing subsurface laws and procurement rules use 
different definitions of local producers and local content, the 
legal basis for applying the local content criteria, in practice, is 
unclear and hence subject to interpretation by state and local 
authorities.  A draft Subsurface Law, which would replace the 1995 
Petroleum Law and the 1996 Subsurface Law, is expected to address 
these discrepancies and unify the definitions of local content. 
 
October 2007 amendments to the existing Subsurface Law allow the 
 
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government to impose amendments to existing subsoil contracts of 
"strategic significance" or even to terminate contracts deemed to 
threaten Kazakhstan's economic security or national interests.  An 
August 2009 government decree lists more than 100 oil and gas 
fields, including Tengiz, Kashagan, and Karachaganak, as subsoil 
fields with "strategic significance."  The government, therefore, 
can initiate changes to existing contracts if it determines that the 
actions of a subsoil user could lead to a substantial change in 
Kazakhstan's economic interests, or threaten Kazakhstan's national 
security. 
 
The draft Subsurface Law has been pending in Parliament since 
October 2008.  The new law, expected to be adopted early in 2010, 
requires separate contracts for exploration and production 
operations, puts shorter time limits on exploration contracts, 
enhances the government's authority to terminate contracts not in 
compliance with the law, and requires tax stability clauses in 
individual contracts to be approved by parliament.  In addition, 
under the terms of the legislation, no future contracts would be 
structured as production-sharing agreements (PSAs), companies must 
establish equal terms, conditions, and pay for Kazakhstani and 
foreign workers, and the government would evaluate subsoil resource 
bids based on promised social contributions. 
 
Tax experts consider Kazakhstan's tax laws to be among the most 
comprehensive in the former Soviet Union.  In January 2009, 
Kazakhstan adopted a new Tax Code that lowered corporate-income and 
value-added taxes, replaced royalty payments with a 
mineral-extraction tax, and introduced excess-profits and rent taxes 
on the export of crude oil and natural gas.  Subsurface users are 
also subject to a signature bonus, commercial-discovery bonus, and 
historical cost reimbursement.  Business associations and investment 
advisors were concerned that the new code would undermine 
tax-stability clauses in existing and future contracts.  The 
government subsequently issued a statement that it would guarantee 
tax stability only for existing production-sharing agreements (PSAs) 
and for one major hydrocarbon project with a tax and royalty 
contract (Tengiz) if parliament legislatively rarifies the 
contracts. 
 
The new Tax Code applies taxes universally and allows only a limited 
set of exemptions.  The code applies an international model of 
taxation, based on the principles of equity, economic neutrality, 
and simplicity.  According to resident experts, this code is an 
improvement over its predecessor and a step forward in establishing 
a transparent and effective tax system, particularly for the 
non-extractive sectors. 
 
On January 1, 2009, the government lowered the corporate income tax 
rate from 30% to 20%.  In 2010, the rate will remain the same (20%), 
although a gradual decrease to 17.5% and 15% in subsequent years is 
very possible.  The value-added tax (VAT) has been reduced gradually 
over the past several years from 16% in 2006 to 12% in 2009, where 
it will likely remain in 2010.  The social tax imposed on employees' 
earnings has a flat rate of 11%.  The personal income tax rate for 
residents is 10%.  Depending on the type of income, non-residents 
working in Kazakhstan are responsible for payment of income tax at 
rates between 5% and 15%. 
 
In 2008, Kazakhstan introduced, adjusted, and ultimately zeroed out 
a customs duty on crude oil and gas condensate exports due to low 
world oil prices.  Each quarter after the Prime Minister signed the 
April 2008 decree, the Ministry of Finance reviewed the customs duty 
rate in light of average global Brent crude prices and adjusted the 
amount of the tariff according to a published formula.  On January 
26, 2009, the government introduced a zero rate for the customs 
duty.  However, should oil prices rise, the government retains the 
right to re-introduce the customs duty.  Companies paying the rent 
tax are exempted from the customs duty. 
 
In addition to concerns about tax stability, contract sanctity, and 
tender transparency, companies in the oil and gas industry have 
 
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reported a number of other business difficulties, including delays 
in obtaining work permits for expatriate employees, alleged 
environmental violations followed by large fines, inconsistent 
enforcement of a Kazakh-language law, and unexpected customs delays 
and documentation. 
 
In January 2003, President Nazarbayev signed the law "On 
Investments" that superseded and consolidated past legislation 
governing foreign investment.  The law establishes a single 
investment regime for domestic and foreign investors and provides, 
inter alia, guarantees of national treatment and non-discrimination 
for foreign investors.  It guarantees the stability of existing 
contracts, with the qualification that new contracts will be subject 
to amendments in domestic legislation, certain provisions of 
international treaties, and domestic laws dealing with "national and 
ecological security, health and ethics." 
 
An issue of serious concern for foreign investors is the absence of 
an international arbitration provision in the draft Subsurface Law. 
The 2003 Investment Law provides for dispute settlement through 
negotiation, Kazakhstan's judicial process, and international 
arbitration.  However, if the new Subsurface Law does not include 
such a clause, the state may choose during pre-contract negotiations 
not to include the provision in the contract.  The Investment Law 
narrows the definition of investment disputes and lacks clear 
mechanisms for access to international arbitration.  U.S. investors 
should note that the U.S.-Kazakhstan Bilateral Investment Treaty, as 
well as the New York Convention, protects U.S.-investor access to 
international arbitration.  Additionally, the Kazakhstani 
Constitution, as well as the 2003 Investment Law, specifies that 
ratified international agreements have precedence over domestic law. 
 In December 2004, Kazakhstan adopted a law "On International 
Commercial Arbitration" (see "Dispute Settlement" for full 
discussion). 
 
The 2003 Investment Law currently contains incentives and 
preferences based on government-determined sectoral priorities, and 
provides for investment tax preferences, customs duties exemptions, 
and in-kind grants.  According to provisions of the new Tax Code and 
2009 amendments to the Investment Law, preferences on corporate 
income tax for Kazakhstani residents replace investment tax 
preferences, such as 10-year corporate income tax exemptions and 
exemptions from land and corporate property taxes.  However, 
preferences for some priority sectors in the form of custom duties 
exemptions and in-kind grants will remain.  (Customs duties 
exemptions are limited to equipment that is destined for use in 
production processes exclusively in Kazakhstan and to imported 
equipment/components if Kazakhstani-produced stocks are not 
available or do not meet international standards). 
 
In 2001, Kazakhstan adopted transfer-pricing legislation, which 
gives tax and customs officials the authority to monitor 
export-import transactions in order to prevent the understatement of 
earnings through manipulation of export prices.  Foreign investors 
have expressed concern that the government specifically rejected the 
use of OECD standards for determining a proper market price under 
its transfer-pricing legislation, creating instead a methodology 
that fails to fully account for all cost and quality differences. 
The government holds that transfer-pricing can take place even in 
transactions between unrelated parties, because the practice, until 
recently, was defined by transaction prices that differ from market 
prices by as much as 10%.  Kazakhstan's deviation from international 
methodology on this issue complicates the ability of firms to obtain 
relief under double taxation treaties.  This remains a contentious 
issue with investors.  A new law on transfer pricing that came into 
force on January 1, 2009, is designed to allow for improved control 
of transfer pricing by applying the commonly accepted "arm's length 
principle."  Foreign investors concede that the new law is more 
closely aligned with international standards, but are concerned that 
the law will be applied not only to transactions with related 
parties, but to all international transactions.  The Embassy is not 
aware of any cases involving the inappropriate application of 
 
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transfer-pricing legislation in 2009. 
 
Although Kazakhstani law holds that no sectors of the economy are 
fully closed to investors, there are sectoral limitations, 
specifically a 20% ceiling on foreign ownership of media outlets and 
a 49% restriction on foreign ownership in the telecommunications 
sector and in new oil exploration and production projects.  However, 
a December 2005 law lifted restrictions on the participation of 
foreign capital in the banking sector.  A ban on foreign bank and 
insurance company branches remains in force.  February 2006 
amendments to the Law on Insurance have eliminated participation 
restrictions for foreign legal entities in insurance and 
re-insurance organizations in Kazakhstan. 
 
Restrictions also exist on foreign ownership of land in Kazakhstan. 
See below (A.6 "Right to Private Ownership and Establishment"). 
 
The draft Subsurface Law reiterates the state's right of first 
refusal on the purchase of shares in new exploration and production 
projects in the extractive industries.  In 2005, the government 
broadened its claim of priority purchase rights to include shares of 
companies that have invested in the oil and gas sector. The same 
amendments allow the government to block the sale of oil and gas 
assets in the interest of "national security."  Additional 
amendments to the current Subsurface Law, signed in December 2008, 
also assign the government the right to exclude selected companies 
from participating in oil and gas investment program tenders in the 
interests of "national security."  Article 71 of the current 
Subsurface Law gives the state the right of first refusal on any 
equity transactions involving subsurface user rights for oil and gas 
or mining operations. According to the draft Subsurface Law, the 
preemptive right now applies to any kind of transaction.  The draft 
Subsurface Law includes a preemption clause that guarantees the 
state the right of first refusal when a party seeks to sell any part 
of its stake in a mineral-resource extraction project.  The state 
claims this preeminent right even in cases where the controlling 
agreement assigns preemptive rights elsewhere (e.g., to other 
investors in a consortium).  However, the draft Subsurface Law 
offers more transparent procedures for the state and companies to 
exercise subsoil rights and provides a clear definition of cases in 
which the state can exercise its priority right. In practice, 
investors may find that a joint venture with a well-connected local 
partner is advantageous to navigate the legal and political 
complexities of operating in Kazakhstan. 
 
Foreign firms operating in Kazakhstan frequently report harassment 
by the Financial Police via unannounced audits, inspections, and 
other methods.   One company reported a request from the Financial 
Police for confidential information on employees, with no apparent 
connection to an ongoing investigation. 
 
Uneven, and sometimes blatantly unfair, application of tax laws is 
particularly egregious when a company is involved in another, 
unrelated dispute with authorities.  Foreign investors also have 
complained about irregular application of other laws and 
regulations.  In some cases, investors have interpreted regulatory 
pressure as an effort to extract bribes.  Investors should not 
assume that their agreement to a settlement with tax authorities 
following an investigation or civil case will prevent the pursuit of 
charges under criminal provisions.  At times, the authorities have 
used criminal charges in civil disputes as a pressure tactic. 
 
By law and in practice, foreign investors can participate in 
privatization projects.  Following an investment, no discrimination 
against foreign investors is apparent.  However, many foreign 
companies cite the need to protect their investments from a 
near-constant barrage of decrees and legislative changes, most of 
which do not "grandfather" existing investments.  In addition to 
arbitrary tax inspections, foreign investors' complaints include 
problems with closure of contracts, delays and irregular practices 
in licensing, and land fees.  Some foreign firms have expressed 
concern about the failure of government organizations to fulfill 
 
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their contractual obligations, particularly regarding payment, which 
can prevent the foreign partner from advancing its investment 
program.  The investor then is exposed to government charges of 
non-performance and the real possibility that the government will 
cancel the contract. 
 
Foreign workers must have a work permit to work legally in 
Kazakhstan. Obtaining these work permits can be difficult and 
expensive. The government cites the need to boost local employment 
by limiting the issuance of work permits to foreigners.  U.S. 
companies should consult legal firms for assistance (see A.5 for 
details) in obtaining work permits.  The work-permit quota system is 
based on the 1998 Law on Employment of the Population.  Under this 
system, the government limits the number of work permits available 
to foreigners based on the area of specialization and geographic 
region. 
 
In December 2007, Kazakhstan adopted new regulations on foreign 
labor that the Ministry of Labor and Social Protection claims 
simplify the issuance of work permits to foreigners.  The Ministry 
also, however, placed additional requirements on employers to 
support the domestic labor market.  According to the new 
regulations, permits for foreign labor are issued only in the event 
that suitable candidates cannot be found in country, which is 
subject to verification and assessment by Kazakhstani labor 
authorities.  Those foreign employers that do receive permits for 
foreign laborers are expected to meet specific terms of agreement 
that include training Kazakhstani citizens to eventually fill 
positions held by foreigners, the gradual overall replacement of 
foreign labor with Kazakhstani citizens, and the creation of new 
jobs for domestic workers in the event of an increase in production 
volumes.  The scale of these individualized terms is directly 
proportional to the number of foreign workers hired.  Kazakhstani 
labor authorities are expected to complete their review of work 
permit applications for foreigners within 20 days.  If awarded, 
employers must provide authorities with documents within 10 days, 
guaranteeing the prompt departure of foreigners after the expiration 
of their permits.  From 2003-2008, the quota steadily increased from 
0.14% to 1.6%.  However, because of the current economic crisis, the 
government reduced by half the quota for foreign labor.  The 2009 
quota of 0.75% of the active labor force will remain in force for 
¶2010. 
 
Index      Ranking  Year 
Heritage Economic Freedom   60.1/83  2009 
World Bank Doing Business 
Ease of Doing Business   63   2008-2009 
 
A.2. Conversion and Transfer Policies 
 
In 1996, Kazakhstan adopted Article 8 of the IMF Articles of 
Agreement, which stipulates that current account transactions, such 
as currency conversions or the repatriation of investment profits, 
will not be restricted. In 1999, the government and National Bank of 
Kazakhstan announced that the national currency would be allowed to 
float freely at market rates, thus abolishing the previous managed 
exchange-rate system. After the tenge devaluation on February 4, 
2009, the National Bank returned to the managed-float exchange-rate 
regime and maintained throughout 2009 the tenge exchange rate in the 
corridor 150 tenge/per U.S. dollar plus/minus 3% (please see section 
A.9. "Efficient Capital Markets and Portfolio Investments"). 
 
No distinction is made between residents and non-residents when 
opening bank accounts. There are no restrictions whereby different 
types of bank accounts are required for investment or import/export 
activities.  For non-residents, money transfers in currency 
associated with foreign investments, whether inside or outside of 
the country, can take place without restriction. The National Bank 
permits non-residents to pay wages in foreign currency (the article 
16 of the law on Currency Regulation and Currency Control).  Foreign 
investors may convert and repatriate tenge earnings made inside 
Kazakhstan. 
 
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In June 2005, President Nazarbayev signed the Law on Currency 
Regulation and Currency Control.  This law lifted restrictions on 
money transfers, allowing residents and non-residents to take up to 
$10,000 in cash out of the country without documentation of the 
money's origin.  However, the transfer of cash amounts exceeding 
$3,000 must be declared, and the transfer of amounts exceeding 
$10,000 must be accompanied by National Bank certification. 
Beginning January 1, 2007, all licensing requirements and procedures 
for foreign-currency operations were eliminated.  Since that time, 
agencies conducting transactions with foreign currency, including 
bank payments and transfers relating to capital movements, must 
simply notify or register at the central bank their operations. 
 
The National Bank requires an "Import [or] export transaction 
passport," ostensibly for the purpose of currency control.  The 
document, which re-states information from other documents, 
complicates import and export processing.  The law's effectiveness 
for its stated purpose -- to ensure that the proceeds from export 
sales are returned to Kazakhstan and to prevent money laundering and 
fraudulent over-invoicing of imports -- is questionable. 
 
The 2005 Law on Currency Regulation and Currency Control was amended 
in July 2009.  Some amendments further liberalize currency controls. 
 The ceiling for transactions requiring passports was increased from 
$10,000 to $50,000.  Residents have a right to calculate the terms 
for repatriation of profit (though based on methods and limits set 
by the National Bank).  Individuals also can open bank accounts in 
foreign banks without notifying the National Bank.  In addition, the 
ceiling for capital movement operations subject to notification or 
registration at the National Bank also was raised from $50,000 to 
$100,000 for capital outflow; and from $300,000 to $500,000 for 
capital inflow.  Export-import credits, with the exception of 
transactions requiring passports and financial loans with terms 
longer than 180 days will remain under the registration regime. 
Borrowers or lenders must register credit transactions with the 
National Bank before making them. 
 
Meanwhile, amendments enhanced the responsibility for non-payment of 
foreign currency on external trade contracts.  In particular, 
administrative charges will be applied for non-payments exceeding 
$50,000, and criminal charges can be initiated for non-payments over 
10,000 monthly calculated indexes (e.g., around $95,000 for 2010). 
 
Amendments also specified measures for a "special currency regime," 
which only can be introduced in emergency situations -- when the 
country's economy and financial system's stability are in jeopardy. 
Measures may include requirements for companies to retain a certain 
percentage of their foreign currency profits in the National Bank of 
Kazakhstan or other authorized banks, the mandatory sale of foreign 
currency earnings, and limits on the use of foreign bank accounts. 
Considered an extreme measure, its application in the foreseeable 
future appears unlikely. 
The National Bank regularly monitors the currency operations of 
selected non-residents.  This procedure primarily affects the oil 
and gas, construction, and mining industries, and companies 
providing architectural, engineering and industrial-design services. 
 According to the National Bank, this monitoring provides better 
statistical data on the balance of payments and external debt. 
 
In July 2007, Kazakhstan adopted an amendment to its Customs Code, 
requiring submission of export declaration forms of country of 
origin to bring goods into Kazakhstan.  An unintentional virtual 
shutdown for imports from many countries, particularly the United 
States, resulted.  The July amendment was repealed in November 2007, 
ending the problem. 
 
The U.S. Embassy is not aware of any concerns with regard to 
remittance policies or availability of foreign exchange for 
remittance of profits. 
 
In 2001, the government announced an amnesty for all Kazakhstani 
 
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citizens repatriating cash or transferring money during a 30-day 
period.  The legalized money was not taxed and became available to 
its owners at the end of the amnesty period.  Kazakhstanis 
repatriated $480 million under this amnesty, of which almost 90% was 
brought to banks in the form of cash.   Another amnesty, which 
concluded on August 1, 2007, resulted in the legalization of nearly 
$7 billion in property. 
 
A.3. Expropriation and Compensation 
 
The 2003 Investment Law represents a step back from the clarity of 
the 1994 law with regard to expropriation and compensation. The 2003 
law allows nationalization by the state in emergency cases "as 
provided in legislative acts of the Republic of Kazakhstan."  Unlike 
the 1994 law, it does not provide clear grounds for expropriation. 
Similarly, the 1994 law required "prompt, adequate and effective" 
compensation at fair market value, with interest. The 2003 law 
differentiates between nationalization and requisition, providing 
full indemnification of the investor in the case of the former, but 
only payment of market value in the case of the latter. Bilateral 
investment treaties (BITs) between Kazakhstan and other countries, 
including the United States, also refer to compensation in the event 
of expropriation. 
 
There has been one case of legal expropriation of a foreign 
investor's property for public purpose.  The investor ultimately 
submitted the case for international arbitration.  In May 2006, 
after lengthy delays and negotiations, the government paid the 
amount awarded by the arbiter. 
 
A.4. Dispute Settlement 
 
There have been a number of investment disputes involving foreign 
companies in the past several years. While the disputes have arisen 
from unrelated, independent circumstances, many are linked to 
alleged breaches of contract or non-payment on the part of 
Kazakhstani state entities. Some disputes relate to differing 
interpretations of joint-venture-agreement and 
production-sharing-agreement (PSA) contracts.  One questions the 
legality of the government's use of ex-post facto regulations 
governing value added taxes.  In some instances, the disputes 
involve hundreds of millions of dollars.  A recurring theme remains 
the unpredictability of actions taken by tax authorities and other 
regulatory agencies.  Kazakhstan is still building the institutional 
capabilities of its court system.  Until it completes this process, 
the performance of courts in the country will be less than optimal. 
Problems also arise in the enforcement of judgments.  Given a 
relative lack of judicial independence, ample opportunity for 
interference in judicial cases exists. 
 
Kazakhstan's Civil Code establishes general commercial law 
principles. 
 
The 2003 Investment Law defines an investment dispute as "a dispute 
ensuing from the contractual obligations between investors and state 
bodies in connection with investment activities of the investor." 
It states that such disputes can be settled by negotiation, in 
Kazakhstani courts, or through international arbitration.  According 
to the law, disputes not falling within the above-noted category 
"shall be resolved in accordance with the laws of the Republic of 
Kazakhstan," thus restricting recourse to international arbitration 
in favor of the Kazakhstani judicial system.  While some investors 
find this legislation problematic since it does not address disputes 
between private entities, others believe that Kazakhstan's Civil 
Code and Civil Procedure Code provide private parties with recourse 
to foreign and/or third party courts. 
 
Additionally, in December 2004, Kazakhstan adopted a law on 
international arbitration. The law appears to give broad authority 
for judicial review of arbitral awards in Kazakhstan.  An early test 
case yielded decidedly mixed results.  In 2005, a U.S. company 
became embroiled in a dispute over payment for the sale of its 
 
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shares in a joint venture to a group of Kazakhstani companies.  The 
London Court of International Arbitration (LCIA) issued a 
preliminary ruling ordering the shares frozen pending its final 
decision.  The acting Kazakhstani court, however, ignored the LCIA's 
ruling and proceeded with its own hearings.  The Supreme Court of 
Kazakhstan ultimately decided the case in favor of the U.S. company. 
 In January 2006, however, the Astana City Court relied on an 
international convention loophole to decline the LCIA's award of 
legal costs to the U.S. firm on the grounds that doing so would be 
detrimental to "public order" in Kazakhstan.  In May 2006, that 
decision was overturned, and the legal costs were awarded. 
 
Kazakhstan has been a member of the International Center for the 
Settlement of Investment Disputes (ICSID) since December 2001. 
 
Any international arbitral award rendered by the International 
Center for the Settlement of Investment Disputes (ICSID), any 
tribunal applying the United Nations Commission on International 
Trade Law Arbitration rules, the Stockholm Chamber of Commerce, the 
London Court of International Arbitration, or the Arbitration 
Commission at the Kazakhstan Chamber of Commerce and Industry 
should, by law, be enforced in Kazakhstan 
 
The U.S.-Kazakhstan Bilateral Investment Treaty can serve to 
buttress the Investment Law in this area.  Kazakhstan ratified the 
New York Convention on the Recognition and Enforcement of Foreign 
Arbitral Awards in 1995. 
 
Although creditor rights are set forth clearly in the 1997 
bankruptcy law, its complexity and numerous subsequent amendments 
result in considerable misapplication in practice.  The latest 
amendments passed in July 2008 and February 2009.  The law now 
contains a detailed list of creditors' rights and prescribes a 
mechanism for their enforcement.  The 2008 amendments elaborated a 
comprehensive list of the governmental authorities involved in 
bankruptcy procedures and expanded the rights of enterprises during 
possible rehabilitation procedures.  The Committee on Work with 
Insolvent Debtors, operating under the umbrella of the Ministry of 
Finance, is Kazakhstan's official bankruptcy agency. 
Monetary judgments are normally made in domestic currency. 
 
In general, the government of Kazakhstan has a mixed record of 
addressing investment disputes.  Foreign investors often have 
endured protracted negotiations.  Most investors prefer to handle 
investment disputes privately, rather than make their cases public. 
The U.S. Embassy advocates on behalf of U.S. firms with investment 
disputes. 
 
Due to BTA and Alliance banks' restructuring negotiations and cases 
filed in London by some former stockholders of BTA bank, the 
government of Kazakhstan enlarged the competence of the Specialized 
Almaty Financial Court.  According to amended article 28 of the 
Civil Code, civil suits about the restructuring of financial 
institutions now fall within the jurisdiction of the Almaty 
Financial Court.  The new Chapter 34-1 of the Civil Code defines an 
order of proceedings of restructuring cases in the courts. 
According to this chapter, all court orders, including claims by 
creditors, preceding the creation of the Almaty Financial Court on 
restructuring should be suspended.  Furthermore, the Court must 
approve creditor-agreed restructuring plans. 
 
A.5.Performance Requirements and Incentives 
 
The Investment Committee under the Ministry of Industry and Trade 
monitors the fulfillment of investor obligations.  If the committee 
determines that a company has not complied with its financial or 
other contractual obligations, the government may revoke the 
company's operating license. 
 
The 2003 Investment Law and 2008 Tax Code provide for tax 
preferences, customs duties exemptions, and in-kind grants as 
incentives for foreign and domestic investment in 
 
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government-determined priority sectors.  As of 2009, investors 
receive tax preferences automatically after implementation of 
projects in non-extractive sectors. The Tax Committee of the 
Republic of Kazakhstan and local authorities administer these 
preferences.  The Investment Committee makes decisions on customs 
duties exemptions (with notification to customs authorities) and 
in-kind grants on a case-by-case basis.  The Ministry of Industry 
and Trade reported that it signed 400 contracts with such 
preferences for a total of about $7-8 billion over the last ten 
years.  Approximately a quarter of these investments included 
foreign involvement.  The law allows the government to rescind such 
incentives and collect back payments if an investor fails to fulfill 
contractual obligations. 
 
Largely focused on selected priority sectors , the system of 
preferences echoes the government's policy of economic 
diversification away from the extractive sector.  The overall list 
contains 245 types of activities grouped into 36 categories.  Those 
priority sectors include agriculture, construction, metallurgy, 
chemistry and pharmaceuticals, oil refining, oil and gas 
infrastructure, transport and information communication, power, 
machinery, tourism and space activity.  The system applies to new 
enterprises, as well as to existing enterprises making new 
investments.  The duration of tax preferences increases with the 
size of investment.  Although not explicitly required, technology 
transfers frequently occur, and sometimes are included in contracts. 
 Because of the accelerated, post-crisis, industrial-development 
program, the government has increased its emphasis on technology 
transfers in foreign investor cooperation. 
 
The government of Kazakhstan intensified its promotion of local 
content in 2009.  On December 30, 2009, President Nazarbayev signed 
a decree in support of Kazakhstani producers.  This law allows the 
imposition of administrative charges for violations of government 
procurement rules, specifically local-content requirements. 
According to new tender rules, proposals that include significant 
proportions of locally-produced goods and services will receive a 
discount (i.e., preferential treatment).  Tender commissions, as 
well as bidders, that do not follow local-content requirements may 
face administrative prosecution.  This rule applies to government 
agencies, state-owned enterprises, national holding companies such 
as Samruk-Kazyna, and subsoil users, both domestic and foreign. 
 
In addition, the Kazakhstani government is elaborating its official 
concept for the development of Kazakhstani content.  A mandate of 
substantial increases by 2014 in the local-content share of 
Kazakhstani-produced goods (up to 50%) and Kazakhstani-produced 
services (up to 90%) is expected. 
 
Typically, an investor's obligations might also include an 
obligation to train local specialists and contribute to the social 
development of the respective regions. 
 
There are no known cases in which U.S. or other foreign firms have 
been denied participation in government-financed or subsidized 
research and development programs on a national basis. 
 
The government has liberalized its trade policies and passed 
legislation to begin bringing its legal and trade regimes into 
conformity with World Trade Organization (WTO) standards. 
Kazakhstan submitted its Memorandum on the Foreign Trade Regime 
(MFTR) in 1996 and the first round of consultations on WTO accession 
took place in 1997.  Kazakhstan has made significant progress in 
implementing the legal framework necessary for accession and signed 
bilateral protocols on market access for goods and services with 
several of its major trading partners.  As of January 1, 2009, 
Kazakhstan had completed bilateral negotiations with 21 of 26 
members of the Working Party.  However, accelerated creation of the 
Customs Union impeded this process.  Russia, Belarus, and Kazakhstan 
officially signed legal agreements to create the Customs Union on 
November 27, 2009 in Minsk.  According to the agreements, a common 
external trade tariff is enacted January 1, 2010. 
 
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Kazakhstan's entrance into the Customs Union will almost double its 
average import tariff.  Kazakhstan will retain some flexibility in 
applying the common external import tariff regime.  For example, 
Kazakhstan will have no tariff on over 900 specific commodity items, 
including modern aircraft, certain types of engines, and raw 
materials needed in the food processing industry, such as tropical 
fruits.  Over 400 specific commodity items will be subject to a 
transitional period varying from one-and-half to five years.  These 
items include pharmaceuticals, medical equipment, processed aluminum 
products, raw materials for the petrochemical industry, paper 
products, rail wagons, combines, and tractors.   In some specific 
cases, Customs Union member states also can apply protective import 
tariffs on selected goods without the consent of the other members, 
but only for six months per year and for a maximum of five years. 
The member states have agreed to grandfather all previously existing 
protective and anti-dumping measures at the time of accession into 
the Customs Union.  The Customs Union implementation timeline 
anticipates implementation of the new common Customs Code and 
abolishment of the Russian-Belarus customs border on July 1, 2010. 
The Kazakhstani-Russian customs border is scheduled for abolishment 
on July 1, 2011. 
 
Despite the creation of the Customs Union, Kazakhstan is expected to 
continue to offer preferential treatment to investors outside of the 
extractive sector in an effort to promote economic diversification. 
 
 
Kazakhstan is also a member of the Eurasian Economic Community 
(EEC), along with Russia, Kyrgyzstan, Belarus, and Tajikistan. 
Armenia, Moldova, and Ukraine have observer status.  Kazakhstan 
permits the importation of goods from EEC partners and certain 
developing or less-developed countries duty-free, or at a reduced 
rate. 
 
A.6. Right to Private Ownership and Establishment 
 
Foreign and domestic private entities have the right to establish 
and own business enterprises and to engage in all forms of 
remunerative activity.  Private entities can freely buy and sell 
interests in business enterprises.  However, state-owned enterprises 
sometimes enjoy better access to markets, credits, and licenses than 
private entities. 
 
Kazakhstan's constitution provides that land and other natural 
resources may be owned or leased by Kazakhstani citizens according 
to conditions established by law.  The 2003 Land Code allows 
citizens of Kazakhstan to own agricultural land and urban land with 
commercial and non-commercial buildings and complexes, including 
dwellings and land used for servicing these buildings.  Under the 
Land Code, only Kazakhstani citizens (natural and legalized) and 
Kazakhstani companies may own land.  The Land Law does not allow 
private ownership for the following types of land: 
 
- land used for national defense and national security purposes; 
- specially-protected natural territories, resorts, recreational 
land and territories of a historical and/or cultural significance; 
- forests, water reservoirs (lakes, rivers, canals, etc.), glaciers, 
swamps, etc.; 
- public areas (urban or rural settlements); 
- main railways and public roads; 
 
Short-term land leases may last up to five years. The maximum period 
for long-term land leases are 49 years.  Foreigners may rent 
agricultural land for up to 10 years.  Foreigners may also own 
agricultural land through either a Kazakhstani-registered joint 
venture or a full subsidiary. 
 
A.7. Protection of Property Rights 
 
Secured interests in property (fixed and non-fixed) are recognized 
under the Civil Code and the 2003 Land Code. Mortgage lending grew 
 
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dramatically in recent years, though decelerated in 2007-2009 due to 
the global financial crisis.  A credit bureau system is in the very 
early stages of development.  All property and lease rights for real 
estate must be registered with special government-owned Real Estate 
Centers, which exist in cities and rural district centers. 
 
In principle, Kazakhstan's Civil Code protects U.S. intellectual 
property.  In addition, the U.S.-Kazakhstan Trade Agreement, which 
came into force in 1993, obliges Kazakhstan to protect intellectual 
property rights (IPR).  In 2004, Kazakhstan ratified the 1997 World 
Intellectual Property Organization (WIPO) Copyright Treaty and the 
WIPO Performances and Phonographs Treaty, and amended the Copyright 
Law to affirmatively protect pre-existing works and sound 
recordings.  In 2005, Kazakhstan amended its Criminal and Civil 
Codes to make IPR crimes easier to prosecute and to toughen 
penalties for violators.  The 2005 amendments played a significant 
role in USTR's 2006 decision to remove Kazakhstan from the Special 
301 Watch list.  While Kazakhstan has demonstrated a commitment to 
improving its IPR regime, substantial weaknesses, particularly in 
the area of civil dispute resolution, remain. 
 
Patent protection is available for inventions, industrial designs, 
and prototypes.  Patents for inventions are available for novel 
processes and products that have industrial applications. The 
National Institute of Intellectual Property performs formal 
examination of patent applications.  Patents for inventions are 
granted for 20 years.  Patents for utility models are granted for a 
five-year period with a possible three-year extension.  Prototypes 
are granted a 10-year initial period of protection, with the 
possibility of an additional five-year extension.  Kazakhstani 
legislation also permits an "innovation" patent, which is granted 
for inventions for an initial three-year period with a possible 
extension for two years.  Issued after only checking the local 
novelty of an invention, an innovation patent is expected to boost 
local-business innovation.  Unsuccessful applicants can appeal 
decisions of the National Institute of Intellectual Property and the 
Committee for Intellectual Property Rights.  Kazakhstan is a member 
of the Moscow-based Eurasian Patent Bureau and the Munich-based 
European Patent Bureau. 
 
Trademark violation is a crime.  Despite historically-questionable 
enforcement, U.S. companies are generally confident that their 
trademarks are protected in Kazakhstan.  Still, imported counterfeit 
goods can commonly be found at local markets.  Marked disparities in 
fees charged to domestic patent and trademark applicants, as 
compared to foreign applicants, exist.  Applications for trademark, 
service-mark, and appellations-of-origin protection should be filed 
with the National Patent Office and approved by the Committee for 
Intellectual Property Rights. Trademarks and service marks are 
afforded protection for 10 years from the date of filing. 
The Law on Copyrights and Related Rights was enacted in 1996.  The 
law largely conforms with the requirements of the WTO TRIPS 
Agreement and the Berne Convention. 
 
Ex officio authority of customs officials to seize counterfeit 
products at the border came into force on January 1, 2010. 
President Nazarbayev signed the relevant amendments to the Customs 
Code in December 2009. 
 
Amendments to the Administrative, Criminal, and Civil Procedural 
Codes have been adopted to bolster IPR enforcement capabilities. 
IPR enforcement measures, while still somewhat sporadic, are 
increasingly robust.  Prosecutions, under both the Criminal and 
Administrative Codes, have led to a steady legitimization of the 
domestic trade in copyrighted material. Progress in IPR protection 
through civil courts is less pronounced as the judicial system 
develops the expertise necessary to resolve more complex civil 
disputes. 
 
Illegal software development and manufacture generally is not 
conducted in Kazakhstan.  Russia and Ukraine are believed to be the 
major sources to the local market. 
 
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Kazakhstan ratified the Berne Convention for the Protection of 
Literary and Artistic Works in 1998 and the Geneva Phonograms 
Convention in 2000. 
 
A.8. Transparency of Regulatory System 
 
Transparency in the application of laws remains a major problem in 
Kazakhstan and an obstacle to expanded trade and investment. 
Foreign investors complain of inconsistent standards and corruption. 
 While foreign participation is generally welcomed, some foreign 
investors point out that the government is not always even-handed 
and sometimes reneges on its commitments. Although the Investment 
Committee of the Ministry of Industry and Trade was established to 
facilitate foreign investment, it has had limited success in 
addressing the concerns of foreign investors. 
 
Opportunities for public comment on proposed laws and regulations 
are sporadic and generally limited.  Contradictory norms often 
hinder the functioning of the legal system.  While Kazakhstan 
recently has defined more clearly which laws take precedence in the 
event of a contradiction, stability clauses granted investors under 
previous versions of the Foreign Investment Law or other legislation 
may not necessarily protect investors from changes in the legal and 
tax regulatory regime.  The 2003 Investment Law holds that contracts 
signed subsequent to its enactment may be subject to domestic 
legislative amendments and international treaty provisions that 
change "the procedure and conditions of the import, manufacture, and 
sale of goods subject to excise duties."  Regional authorities can 
create additional bureaucratic encumbrances, especially in the 
licensing and issuance of permits. 
 
Kazakhstan, by law, will provide compensation for violations of 
contracts that were properly entered into and guaranteed by the 
government.  Where the government has merely "approved" or 
"confirmed" a foreign contract, Kazakhstan's responsibility is 
limited to the performance of administrative acts (i.e., those 
"concerning the issuance of a license, granting of a land plot, 
mining allotment, etc.") necessary to facilitate the subject 
investment activity. 
 
Kazakhstan's institutional governance is weak, further adding to the 
problems of transparency in commercial transactions.  Senior 
government officials have a large say in minor and major 
transactions, and decisions are often made behind closed doors.  A 
2007 Licensing Law established the legal framework for licensing 
activities in Kazakhstan.  It requires the relevant agency to issue 
a license within one month of a company's submission of all required 
documents.  The 2007 law simplified procedural requirements for 
issuing licenses, reduced the number of licensed activities from 426 
to 349, and introduced a mechanism to help prevent the extension of 
this list by other legal acts.  Experts estimate that overall 
licensing for the period 2004-2009 was reduced three-fold, and 
licensing for agriculture, education, and health care has been 
decentralized.  However, licensing remains problematic, particularly 
for small- and medium-sized enterprises. 
 
A.9. Efficient Capital Markets and Portfolio Investment 
 
Kazakhstan's efforts to create a sound financial system and stable 
macroeconomic framework have been notable among former Soviet 
republics.  Much progress has been made in the creation and 
implementation of an adequate legal framework.  In comparison with 
other parts of the economy, reform of the financial system has been 
deeper and more effective.  The financial system has started to 
mediate financial resource flows and direct them to the most 
promising parts of the economy.  Official policy clearly supports 
credit allocation on market terms and the further development of 
legal, regulatory, and accounting systems consistent with 
international norms. 
 
Most domestic borrowers receive credit from Kazakhstani banks. 
 
ASTANA 00000044  013.3 OF 027 
 
 
However, foreign investors find the margins taken by local banks and 
the collateral required for credit to be very onerous.  It is 
usually cheaper and simpler for them to use retained earnings or 
borrow from their home country.  Because the Kazakhstani Stock 
Exchange is struggling to gain momentum, it is not yet a realistic 
source of funds (see below).  Since 1998, Kazakhstani banks have 
placed Eurobonds on international markets and obtained syndicated 
loans, the proceeds of which have been used to support domestic 
lending.  Leading Kazakhstani banks were able to obtain reasonably 
good ratings from international credit assessment agencies. 
However, the global crisis hit the country's economy, and 
drastically changed the attitude of foreign investors to Kazakhstan 
and the landscape of banking sector. 
 
The National Bank has demonstrated an ability to maintain a stable 
exchange rate and strike a balance between keeping inflation down 
and supporting the economy and financial sector.  The National Bank 
spent approximately $6 billion from its foreign currency reserves 
during the last quarter of 2008 and January 2009 to defend the 
tenge.  On February 4, 2009, the National Bank allowed the tenge to 
devalue from a level of 122 tenge.  The new target rate of 150 tenge 
to the dollar was expected to conserve foreign-exchange reserves and 
increase domestic competitiveness.  Due to favorable oil and 
commodity prices at world markets in 2009, the National Bank 
successfully maintained the exchange rate within the promised 
corridor of 145-155 tenge to the dollar and replenished its 
international reserves.  The National Bank's gold and 
foreign-currency reserves grew by 16.8 percent from $19.87 billion 
on January 1, 2009 to $23.2 billion on January 1, 2010.  The 
liquidity crunch and efforts to boost the economy forced the 
National Bank to adjust its monetary policy.  In the course of 2009, 
the refinancing rate was reduced consecutively six times from 10% in 
January 2009 to 7% in December 2009. 
 
The global liquidity crisis, which hit in late summer 2007, 
presented a substantial challenge to the Kazakhstani banking system, 
which had come to rely heavily on external borrowing over the 
preceding five-year period.  Kazakhstani banks had been directing 
much of the borrowed funds into the country's construction and 
real-estate sectors, particularly in the form of 
construction-financing and mortgages for new housing in Astana and 
Almaty.  The sudden global liquidity dry-up abruptly left some 
leading Kazakhstani banks unable to continue their aggressive 
external borrowing, forcing them to curtail their domestic-lending 
activity.  While policymakers widely saw this development as a 
healthy correction in view of the preceding liquidity glut, the 
National Bank of Kazakhstan and the government introduced measures 
in late 2007 to provide liquidity to the banking system and inject 
capital in the cooling construction sector.  Continued world-wide 
financial turmoil, marked by falling commodity prices and increasing 
unemployment have exacerbated the situation of Kazakhstan's largest 
banks.  In October 2008, the Kazakhstani government announced 
stabilization plans that included the purchase of 25% ownership 
stakes of Kazakhstan's four largest private banks, thereby injecting 
an additional $4 billion in to the banking system. 
In order to prevent banking-sector collapse, state-owned 
Samruk-Kazyna National Welfare Fund took over BTA and Alliance 
banks, the second and fourth largest Kazakhstani banks, in February 
¶2009.  In April 2009, BTA and Alliance banks announced their default 
on principal payments.  In July 2009, BTA declared a moratorium on 
interest payments as well.  Both banks are conducting restructuring 
negotiations and hope to reach final agreements with creditors early 
in 2010.  As of April 2009, the total external debt of BTA bank was 
valued at $13 billion, with $3 billion due to be repaid in 2009. 
Alliance Bank's total debt due after August 2009 eligible for 
restructuring was estimated at $4.2 billion. 
 
Kazakhstani authorities took former top managers of BTA and Alliance 
Banks to court on corruption charges. 
 
In May 2009, another Kazakhstani financial institution, 
"Astana-Finance JSC," announced a default and began restructuring 
 
ASTANA 00000044  014.3 OF 027 
 
 
talks with creditors.  In October 2009, Temir Bank, affiliated with 
BTA bank, also announced a default and started negotiations with 
National Welfare Fund Samruk-Kazyna on recapitalization. 
 
International donor organizations and local analysts unanimously 
agree that the situation in the banking sector deteriorated 
significantly in 2009.  The slowing economy (according to the 
preliminary government assessment, annual GDP growth reached 0.5-1% 
in 2009 versus 3% in 2008) and exchange-rate devaluation increased 
pressure on the banks.  As of December 1, 2009, the share of 
non-performing loans (NPLs) reached 31.2% of banks' total loan 
portfolio.  Although the total external debt of commercial banks 
decreased in 2008 -2009, the level remained high ($32.2 billion as 
of June 30, 2009).  The government, National Bank, and Financial 
Supervision Agency (FSA) took a multi-pronged approach to overcome 
the banking sector's challenges.  In December 2008, the government 
increased the maximum limit for deposit insurance seven-fold from 
700,000 tenge (just under $6,000) to 5 million tenge (about 
$33,000).  The total government bail-out package for the banking 
sector totaled around $10 billion.  In 2010, the FSA and National 
Bank are expected to begin implementation of the "Financial Sector 
Development in post-crisis period" concept, according to which the 
FSA's control and regulatory functions will be significantly 
strengthened.  (NOTE:  The FSA, Kazakhstan's main financial 
regulator, has broad authority over the banking and insurance 
sectors, as well as the stock market.  The FSA is financed from the 
National Bank's budget and subordinate to the President of 
Kazakhstan. END NOTE.) 
 
Kazakhstani authorities' efforts appear to be boosting confidence in 
the banking sector.  According to the FSA, private deposits have 
rose 23.3% January-November, 2009.  As of December 1, 2009, the 
total amount of private deposits reached approximately $12.5 
billion. 
 
In operation since 1997, the Kazakhstani Stock Exchange (KSE) merged 
with the Almaty Regional Financial Center (AFC) in 2008, and new 
listing rules were introduced.  Inadequate financial records prevent 
many companies from being put on the exchange.  Moreover, company 
managers fear diluting control of their enterprises by selling 
shares. 
 
As of October 1, 2009, the total capitalization of the KSE was $65.2 
billion, or 56.8% of GDP.  Despite a negative trend of declining 
value since mid-2007, capitalization of the stock exchange in both 
the absolute value of total capitalization and capitalization 
relative to GDP slightly increased in 2009. 
 
Due largely to Kazakhstani companies' recalcitrance to dilute 
ownership and provide extensive disclosure, the Kazakhstani debt 
market is substantially more developed.  In October 2009, debt 
instruments accounted for 58.72%, stocks were 18.41 %, and 
government papers comprised 22.48% of total KSE trade. 
 
Since 1999, several dozen bank and non-bank corporations, large and 
small, have issued bills, notes, and bonds with maturities ranging 
from three months to seven years.  Rates for borrowers have declined 
on average from approximately 16% in September 1999 to approximately 
9% in 2006.  Maturities have increased from one-and-a-half years to 
up to 10 years during the same period.  Earlier issues were matured 
and redeemed.  However, defaults began in 2009.  As of December 1, 
2009, 25 companies defaulted on 43 issues of corporate bonds, a 
total nominal value of which equaled 273.98 billion tenge 
(approximately $1.85 billion). Nevertheless, in contrast to 
stock-market debt instruments, yield rates grew in 2009 from 12.3 % 
at the end of 2008 to 15%.  In 2009, the volume of trade in 
government securities grew by 21% and reached $9.44 billion.  As of 
December 2009, the effective yield rate on middle-term government 
notes (with a three-year maturity) was up to 7.64%.  Longer-term 
government notes (with maturities up to 10 years) were offered at 
6.5%. 
 
 
ASTANA 00000044  015.3 OF 027 
 
 
Trading on the KSE is overwhelmingly dominated by block trades, 
liquidity is low, and the spreads are extremely wide.  In 2006, 
several large Kazakhstani companies issued initial public offerings 
on the London Stock Exchange (LSE).  In compliance with a 2006 law 
requiring a domestic issuance to accompany any foreign IPO by a 
Kazakhstani company, these companies also offered shares on the KSE. 
 Despite these offerings and the Kazakhstani pension funds' (see 
below) tentative moves to invest in KSE-traded shares, the exchange 
remains in a very early stage of development.  The crisis years 
2008-2009 again proved the KSE's insignificance.  Decreased 
capitalization and diminished transaction volumes at KSE have not 
impacted the overall economic situation and financial markets due to 
the stock market's underdevelopment. 
 
The plans for the "Almaty Financial Center" (see below) and upcoming 
new concept of Financial Sector Development aim to spearhead the 
development of Kazakhstan's securities markets. 
 
In 1998, the government introduced an accumulative pension system 
that requires all employed persons to contribute 10% of their salary 
to the pension funds.  As of November 2008, the 14 funds (13 private 
and one state-owned) operating in Kazakhstan held approximately 
$11.5 billion in pension savings.  Custodian banks hold pension 
assets.  Asset management companies invest the contributions on 
behalf of the pension funds.  While the government provides specific 
restrictions on pension funds' investments, these restrictions were 
relaxed in 2006, allowing some involvement in Kazakhstani equities. 
As of 2009, pension assets must still be invested in specific 
categories of securities, including corporate and government bonds 
and securities issued by foreign governments and foreign corporate 
securities.  In addition, around 5% of pension funds' assets are 
deposited in commercial banks.  Pension funds overall did not fare 
well in 2008-2009 because of global losses and risky investment 
policies.  In November 2009, four pension funds had total losses 
amounting to $6.6 million.  A generally positive dynamic exists. 
The total net profit of all pension funds was $138 million in 
November 2009.  The government planned to sell some shares of state 
enterprises on the national stock market, in part to provide a more 
profitable, alternative vehicle for the investment of pension fund 
assets.  Amendments made to pension fund legislation in November 
2008 guarantee the preservation of pension savings, and grant 
individual investors the right to choose either a conservative, 
moderate, or aggressive type of individual investment portfolio. 
 
There appear to be no "cross-shareholding" or "stable shareholder" 
arrangements used to restrict foreign investment in private firms 
through mergers and acquisitions.  Joint-stock companies may not 
cross-hold more than 25% of each other's stock unless they have an 
exemption codified by law, and may not exercise more than 25% of the 
votes in a cross-held joint-stock company.  Kazakhstani law 
recognizes companies as "related" if one company or legal entity 
holds more than 20% of the shares of another.  However, the owning 
company may not vote more than 25% of the total shares at the 
general meeting of shareholders of the related company.  The general 
meeting must approve various corporate actions, such as mergers and 
acquisitions.  This rule applies to all persons, domestic or 
foreign. 
 
There have been very few hostile takeovers in Kazakhstan, primarily 
because there are few publicly-traded firms.  Defensive measures are 
not targeted toward foreign investors in particular.  Current 
legislation provides a legal framework for takeovers.  The Civil 
Code requires a company that has purchased a 20% share in another 
company to publish information about the purchase.  However, 
business realities show that successful local companies may not be 
well enough protected from professional hostile takeovers in most 
cases. 
 
The 1998 Law on Joint-Stock Companies provides the basis for the 
regulation of open and closed-type joint-stock companies.  It also 
contains clauses to protect investors in often-abused circumstances, 
such as: 
 
ASTANA 00000044  016.3 OF 027 
 
 
 
- issuance of additional shares; 
- maintenance of charter capital and restrictions on payments of - 
dividends; 
- re-purchase by a company of its own shares; 
- debt-to-equity conversions; 
- fiduciary duties imposed on company officers; 
- proxy votes; 
- independent audit; and 
- the determination of asset values during the sale of company 
property. 
 
The Law on Joint-Stock Companies also regulates tender offers for 
stock of open joint-stock companies by requiring the purchaser to 
notify the Financial Supervision Agency and target company of its 
intention to purchase 30% or more of the target company.  After such 
purchase, the buyer must offer to all remaining shareholders to 
purchase their shares at the average price over the six months prior 
to purchase. 
 
No laws or regulations specifically authorize firms to adopt 
articles of incorporation or associations, which limit or prohibit 
foreign investments.  The Law on Joint-Stock Companies, however, 
allows charter limits on the number of shares or votes that one 
shareholder may have. 
 
In March 2007, the government adopted legislative amendments to 
protect minority stockholders' interests.  Numerous violations of 
their interests and the government's desire to promote the 
development of the stock exchange prompted the law's enactment. 
 
Standards, including sanitary and phyto-sanitary standards, are 
promulgated solely by the Committee for Technical Regulation and 
Metrology (Gosstandard).  Technical committees constituted by 
Gosstandard, and which may include producers, scientific and 
engineering associations, and technical experts, prepare proposals 
for the adoption, amendment, or abolishment of state standards. 
International multilateral and bilateral agreements regulate foreign 
participation in the standardization process. 
 
A.10.Competition from State-Owned Enterprises 
 
Formally, private enterprises can compete with public enterprises 
under the same terms and conditions.  However, state-owned 
enterprises do enjoy better access to markets, credits, and licenses 
than private entities (see section A.6. Right to Private Ownership 
and Establishment). 
 
The government of Kazakhstan actively consolidated state-owned 
enterprises in recent years. As of the end of 2009, the following 
state-owned holding companies existed in Kazakhstan: 
 
¶1. Samruk-Kazyna National Welfare Fund created in October 2008 
through a merger of the Samruk State Holding Company and Kazyna 
Sustainable Development Fund.  Modeled on Singapore's Temasek, 
Kazakhstan's largest national holding company manages the state's 
assets in oil and gas, energy, transportation, telecommunication, 
and financial and innovation sectors.  According to some estimates, 
Samruk-Kazyna controls around 91% of Kazakhstan's assets in total. 
 
¶2.  KazAgro manages the state's agricultural holdings, including the 
National Food Contract Corporation (wheat trade), KazAgroFinance 
(leasing to farmers), Agrarian Credit Corporation, Corporation on 
Livestock Development, and Fund of Financial Assistance to 
Agriculture.  Chaired by the Deputy Prime-Minister, the Board of 
Directors includes the Ministers of Finance, Agriculture, and 
Economy and Budget Planning and three independent directors. 
KazAgro closely interacts with the Ministry of Agriculture. 
 
¶3.  National Holding Parasat is charged with stimulating the 
development of scientific research and domestic know-how in the 
high-tech sector.  The holding company manages several scientific 
 
ASTANA 00000044  017.3 OF 027 
 
 
institutions and funds.  Chaired by the Minister of Education of 
Science, the Board includes the Chairmen of the Informatization and 
Telecommunication Committee and Science Committee and President of 
the National Telecommunication Company. 
 
¶4.  Created in May 2008, National Medical Holding company seeks to 
implement business-oriented innovative corporate management in the 
newly built hospitals of Astana city.  Prime-Ministerial Decree 
appoints the Managing Board's Chairman who is subordinate to the 
Ministry of Health and Prime Minister's office; 
Created for the efficient management of state-owned media resources, 
National Holding company Arna-Media controls the activity of, among 
others, Khabar Agency (Khabar TV channel), KazTeleRadio, newspapers 
"Kazakhstanskaya Pravda" and "Yegen Kazakhstan" (official government 
press), and broadcast company "Katelko."  Arna-Media reports to the 
government of Kazakhstan. 
 
In addition, seven regional Social Entrepreneurial Corporations 
(SECs) consolidate all governmental assets in the regions.  SECs are 
expected to serve as a link between business and regional 
governments.  In 2009, the Ministry of Industry and Trade received 
control over all SECs' stocks. 
 
National Welfare Fund "Samruk-Kazyna" unifies all key national 
companies of the Kazakhstani economy.  As of the end of 2009, 
Samruk-Kazyna had 36 subsidiaries and affiliated companies, 
including "KazMunaiGas" (oil and gas), "Kazakhstan Temir Zholy" 
(rail way company), "KazakhTeleCom," "KazPost," Air Astana, KEGOC 
(electricity grid operating company), and a number of development 
institutions, such as the Development Bank of Kazakhstan, Investment 
Fund, Innovation Fund, and Kazakhstani Export Promotion Center. 
Development institutions aim to stimulate the country's 
non-extractive sector and diversify the economy.  In addition, 
Samruk-Kazyna continues to establish new companies, such as the 
United Chemical Company and Mining Company "Tau Ken-Samruk." 
 
The Prime Minister chairs the Board of Directors of Samruk-Kazyna, 
on which the Ministers of Finance, Industry and Trade, Economy and 
Budget Planning, and Energy and Mineral Resources, the assistant to 
the President of Kazakhstan, and two foreign independent directors 
serve.  In February 2009, President Nazarbayev signed a separate law 
on the National Welfare Fund "Samruk-Kazyna".  According to this 
law, Samruk-Kazyna acquired a special status and rights. 
Samruk-Kazyna thus can conclude large transactions between members 
of the Samruk-Kazyna group without public notification.  (NOTE: 
According to Kazakhstani law, all joint-stock companies must notify 
the public of large transactions.  END NOTE.)  Samruk-Kazyna also 
has a pre-emptive right to buy strategic facilities and bankrupt 
assets.  Samruk-Kazyna is exempted from government procurement 
procedures and has the right to establish its own procurement rules. 
 Moreover, the government can transfer to Samruk-Kazyna state-owned 
property.  Experts believe this provision allows a simplified 
process to transfer state property to private owners (i.e., state 
property can be easily privatized without any tender process or 
observation of privatization legislation). 
 
The law requires National Holding Companies to publish annual 
reports and submit their books to independent audit.  In 2009, 
Standard&Poors assessed Samruk-Kazyna's transparency at 24 out of a 
possible score of 100. 
 
National Oil Fund: 
 
Being an oil-rich country, Kazakhstan has a sovereign wealth fund, 
which is called the National Oil Fund of the Republic of Kazakhstan. 
 Established by Presidential decree in 2000, the fund aims to 
diminish the country's budgetary dependence on fluctuations of world 
oil prices and to accumulate savings for the benefit of future 
generations.  The Fund accumulates all direct taxes from the oil 
sector, revenues from the privatization of state property in mining 
and manufacturing industries, and revenues from sales of farmlands. 
As the government's agent, the Ministry of Finance owns the National 
 
ASTANA 00000044  018.3 OF 027 
 
 
Fund, and the National Bank is a trustee of the Fund.  The National 
Bank also selects and hires external administrators from 
internationally-recognized investment companies or banks. 
Information on external administrators and the assets they manage is 
confidential. 
 
Two portfolios -- stabilization and saving -- compose the National 
Fund.  Not fixed, distribution of assets between these two 
portfolios depend on the economic situation.  The National Fund 
invests in the domestic economy through "official transfers."  The 
budget law approves the annual size of official transfers from the 
National Fund to the national budget.  These official transfers 
cannot exceed one third of the National Fund's assets, and in 
principle, only should finance development projects.  In 2008- 2009, 
the government and National Bank had to increase National Fund 
spending for their bail-out package.  As a result, the stabilization 
portfolio increased in comparison to the saving portfolio. 
According to the government's Anti-Crisis program approved in 2008, 
around $10 billion of the National Fund was directed for 
stabilization purposes.  Samruk-Kazyna was assigned as the operator 
of these funds. 
 
The Ministry of Finance and National Bank prepare the National 
Fund's annual report, which the President approves.  In addition, 
the Ministry of Finance and National Bank publish on their websites 
(www.minfin.kz, www.nationalbank.kz) monthly and annual reports on 
revenues and use of the National Fund money.  Although these reports 
provide information on the Fund's general financial situation, they 
do not provide details.   As of January 1, 2010, the National Fund's 
assets totaled $24.37 billion.  Total international reserves of the 
country, including the National Bank's foreign currency reserves, 
equaled $47.6 billion (in current prices). 
 
A.11. Corporate Social Responsibility 
 
Even though Kazakhstan has not adhered to the OECD Guidelines for 
Multinational Enterprises, the idea of corporate social 
responsibility is well known in Kazakhstan due to the government's 
promotion of it.  In his addresses to foreign investors and local 
businesses, President Nazarbayev has asked them to proactively 
implement principles of social responsibility, including by 
supplying quality goods and services to customers, providing 
occupational safety, legally paying workers, and investing in human 
growth potential.  The President annually awards "Paryz" ("Honors" 
in the Kazakh language) for achievements in the area of corporate 
social responsibility.  In 2009, a U.S. company was awarded the 
Golden Paryz for the best collective agreement.  Companies who 
employ corporate social responsibility approaches are viewed 
favorably, especially in the regions. 
 
A.12.Political Violence 
 
There have been no incidents of politically-motivated violence 
against foreign investment projects, and politically-motivated civil 
disturbances remain exceptionally rare.  Stable since independence, 
Kazakhstan has good relations with its neighbors.  The government 
continues to express concern over the security of its borders with 
Kyrgyzstan and Uzbekistan, which it views as vulnerable to 
penetration by extremist groups. 
 
Kazakhstan's 2007 parliamentary elections took place without 
violence or unrest.  President Nazarbayev's Nur Otan party won every 
seat in the lower house of parliament, with an overwhelming majority 
of the votes.  In its assessment, the Organization for Security and 
Cooperation in Europe (OSCE) noted that the election did not meet a 
number of OSCE commitments and international standards for 
democratic elections.  Although opposition groups denounced the 
election as fraudulent, no significant demonstrations against the 
announced results occurred.  The next parliamentary elections are 
scheduled for 2012. 
 
Opposition parties perceive the February 2006 murders of a prominent 
 
ASTANA 00000044  019.3 OF 027 
 
 
opposition politician and his two associates as politically 
motivated.  The former chief of staff of the Senate was convicted in 
August 2006 of having ordered the murders.  Prosecutors charged that 
personal animosity motivated him. 
 
A.13. Corruption 
 
Although the Kazakhstani Criminal Code contains special penalties 
for accepting and giving bribes, corruption is prevalent throughout 
Kazakhstan.  The President issued an anti-corruption decree in April 
2009, which foresees whistle-blower protection, punishment for state 
officials that fail to report corruption cases, and measures to 
prevent conflict of interests.  Amendments to the anti-corruption 
law were signed on December 7, 2009.  These amendments increase 
punishments for corruption crimes, institute mandatory asset 
forfeitures, broadens the definition of corruption crimes to include 
fraud committed by government officials, and criminalized the 
acceptance of a bribe on behalf of a third party and acceptance of 
intangible assets.  The law also extended the definition of 
government official to managers of companies in which the government 
holds more than a 35% stake. 
 
The Ministry of Interior, Financial Police, Disciplinary State 
Service Commission, and Committee for National Security (KNB) are 
responsible for combating corruption.  However, some problems with 
jurisdiction and competition between the Financial Police and KNB 
have occurred over the past year. 
 
Transparency International (TI) has a national chapter in 
Kazakhstan.  The government has signed on to the Extractive 
Industries Transparency Initiative (EITI), and is expected to 
complete the validation process by the deadline of March 2010. 
Kazakhstan's rating rose from 2.2 in 2008 to 2.7 this year in TI's 
Corruption Perceptions Index for 2009.  TI experts believe the 
improvement resulted from the government's desire to improve 
conditions for foreign direct investment and its 2010 chairmanship 
of the Organization for Security and Cooperation in Europe (OSCE). 
However, they also point out that corruption remains systemic, with 
the most problematic areas being the judiciary, police, customs, 
property rights, land registration, and construction projects. 
 
U.S. firms have cited corruption as a significant obstacle to 
investment.  Law-enforcement agencies occasionally have pressured 
foreign investors who are perceived to be uncooperative with the 
government.  The government and local-business entities are widely 
aware of the legal restrictions placed on U.S. business abroad 
(i.e., the Foreign Corrupt Practices Act). 
 
In 2003, two U.S. citizens were charged in the United States with 
violating the Foreign Corrupt Practices Act in a case that received 
significant international media attention.  The two persons 
allegedly channeled tens of millions of dollars in bribes to two 
senior Kazakhstani officials during the 1990's in order to 
facilitate oil deals for American companies.  One currently is 
serving a jail term.  The criminal case against the second defendant 
is ongoing. 
 
A.14. Bilateral Investment Agreements 
 
The United States-Kazakhstan Bilateral Investment Treaty came into 
force in 1994.  In 1992, the United States and Kazakhstan signed an 
Investment Incentive Agreement. 
 
In 1996, the Treaty on the Avoidance of Double Taxation between the 
United States and Kazakhstan came into force.  However, an ongoing 
dispute with a U.S. investor raises concerns with the government's 
tax treaty compliance.  Since independence, Kazakhstan has ratified 
treaties on the avoidance of double taxation with 39 countries.  In 
2008-2009, Kazakhstan ratified treaties with Malaysia and Japan, and 
signed, but has not yet ratified, ones with Armenia, Luxembourg, and 
the Arab Emirates.  Kazakhstan has bilateral investment agreements 
in force with 42 countries, including the United States, Great 
 
ASTANA 00000044  020.3 OF 027 
 
 
Britain, Germany, France, Austria, Russia, Korea, Iran, China, 
Turkey, and Vietnam.  In 2009, Kazakhstan signed a multilateral 
investment agreement with the Eurasian Economic Community. 
 
A.15. OPIC and Other Investment Insurance Programs 
 
The Overseas Private Investment Corporation (OPIC), an independent 
U.S. government agency that provides project financing, political 
risk insurance, and a variety of investor services, has been active 
in Kazakhstan since 1994.  OPIC is seeking commercially-viable 
projects in the Kazakhstani private sector.  OPIC offers a full 
range of investment insurance and debt/equity stakes. 
 
Kazakhstan is a member of the Multilateral Investment Guarantee 
Agency (MIGA), which is part of the World Bank Group and provides 
political-risk insurance for foreign investments in developing 
countries. 
 
Kazakhstan's national currency, the tenge, experienced a 20% 
devaluation in February 2009 primarily due to the global economic 
recession and depressed oil prices.  The National Bank of Kazakhstan 
manages the tenge's exchange rate relative to other global 
currencies within a tight trading band, and they plan to broaden the 
tenge's trading band in 2010.  No devaluations are expected in 2010. 
 As economic conditions improve over the year, the tenge is 
projected to appreciate marginally against the dollar. 
 
A.16. Labor 
 
The 1999 Labor Law and the Constitution guarantee basic workers' 
rights, including the right to organize and right to strike.  In 
April 2009, 70 workers at UzenMunayGaz (Uzen Oil and Gas) went on 
strike for 10 days during a confrontation with management over 
failure to pay outstanding wages.  The strikers succeeded in their 
demands. 
 
The 1996 Law on Labor Disputes and Strikes lays out the procedure to 
resolve disputes. However, the law also restricts strikes by 
requiring, inter alia, that a peaceful attempt at a solution first 
be made, that two-thirds of the labor collective must approve the 
strike, and that the employer must be warned 15 days in advance in 
writing.  In addition, strikes for political purposes are forbidden. 
 
 
A separate 1992 Law on Collective Bargaining Agreements sets out the 
basic framework for concluding such agreements.  There are a growing 
number of instances in which unions have successfully negotiated 
collective bargaining agreements with management.  Following a 
widely-publicized mining tragedy and subsequent strike in January 
2008, the government launched a pro-union campaign called "Sign a 
Collective Bargain" intended to empower workers to more effectively 
protect their rights as members of the workforce.  This action 
marked a significant change in policy in which independent unions 
and collective bargaining groups are "no longer seen as the enemy" 
according to a prominent independent labor union organizer. 
 
In May 2007, Kazakhstan passed a new Labor Code, encompassing all 
the preceding legislation under a single umbrella and retaining key 
provisions of all the previous labor laws.  The Labor Code extended 
minimum mandatory vacation time from 18 to 24 days, provided an 
outline of labor unions' and labor representatives' rights, and 
toughened rules governing the dissolution of labor contracts. 
 
The 1993 Law on Professional Labor Unions legally guarantees against 
limitations of labor.  It also grants socio-economic, political, and 
personal rights and freedoms as a result of union membership and 
prohibits the denial of employment, the denial of promotion, or 
termination of employment on the basis of such membership. 
Kazakhstan also joined the International Labor Organization (ILO) in 
¶1993.  As of December 2009, Kazakhstan has ratified 17 ILO 
conventions, including those pertaining to minimum-employment age, 
forced labor, discrimination in employment, equal remuneration, 
 
ASTANA 00000044  021.3 OF 027 
 
 
collective bargaining, and the worst forms of child labor. 
Currently, the Labor Ministry is preparing the basis for 
ratification of ILO Convention 156 on Equal Opportunities and Equal 
Treatment for Men and Women Workers: workers with Family 
Responsibilities. 
 
In 2009, the minimum wage was $92.56 per month, with approximately 
10.5% of the population receiving income below that level as of the 
3rd quarter 2009.  In real terms, the minimum subsistence level has 
declined year-on-year due to the tenge's devaluation.  The minimum 
pension in 2009 was $102.98.  By government estimates, 2009 
unemployment was 6.3%-6.5%. 
 
Kazakhstan has an educated and technically-competent workforce. 
However, the demand for specialized skilled labor created by the 
simultaneous development of several major oil fields in western 
Kazakhstan has exceeded locally-available supply.  Foreign investors 
increasingly cite a lack of skilled workers and technical 
professionals.  Management expertise and marketing skills are also 
in short supply.  Many large investors rely on foreign workers, 
particularly from Turkey, to fill the vacuum.  In turn, the 
Kazakhstani government has made it a priority to ensure that 
Kazakhstani citizens are well-represented on foreign-enterprise 
workforces, and is particularly keen to see Kazakhstanis hired into 
the managerial and executive ranks of those enterprises.  In late 
2006, the government discussed measures to limit the inflow of 
foreign workers, particularly unskilled, and pressure large foreign 
investors to hire and train Kazakhstanis.  Since 2001, the quota 
system has required employers to search for local workers prior to 
the issuance of work permits for foreigners (see section A.1.).  On 
December 30, 2009, President Nazarbayev signed a decree which 
increases local-content requirements, particularly for companies 
involved in extractive activities.  Specifically, petroleum and 
mining companies now will be obliged to fulfill the requirements of 
the Kazakhstani content decree.  Several U.S. employees of companies 
doing business in Kazakhstan informed the U.S. Embassy in 2009 that 
their work permits have come under increased scrutiny by immigration 
authorities.  U.S. companies are strongly advised to contact 
locally-based law and accounting firms, as well as the U.S. 
Commercial Service in Almaty, for the latest information on work 
permits. 
 
Employers' reliance on foreign labor in the face of persistent 
poverty in rural Kazakhstan became a political issue in recent 
years.  The debate has revolved around the underlying causes of some 
violent incidents between Kazakhstani and foreign workers.  A major 
October 2006 brawl that involved over 400 workers epitomized the 
tension.  Policymakers often point to disparities in wages and 
working conditions between Kazakhstani and foreign workers. 
Employers retort that the lack of domestic skilled labor frequently 
necessitates management of Kazakhstani laborers by foreigners.  In 
2009, authorities in Atyrau oblast continue to pursue a case against 
Agip KCO contracting companies, alleging that these companies 
violate Kazakhstani labor law because their Kazakhstani workers work 
60 hours a week instead of the 40 hours required by the labor law. 
 
 
A.17. Foreign-Trade Zones/Free Ports 
 
A system of tax preferences exists for enterprises engaging in 
prescribed economic activities in the "special economic zones."  As 
of December 2009, the six such established zones were the "New 
Administrative Center" in Astana, the Seaport of Aktau, the Alatau 
Information Technology Park (near Almaty),  the Ontustik Cotton 
Center in south Kazakhstan, the international tourism zone "Borabay" 
(resort area in 300 km from Astana), and Atyrau Petrochemical 
Cluster.  In the second half of 2006, the government took steps 
toward establishing the Almaty Financial Center, a legal and 
institutional framework aimed at making Almaty the financial capital 
of Central Asia.  The plans, which remain in very early stages of 
implementation, include tax privileges for major participants in the 
financial marketplace, such as investors, broker-dealers, and 
 
ASTANA 00000044  022.3 OF 027 
 
 
issuing corporations.  The legal framework for the Almaty Financial 
Center includes a specialized court with jurisdiction over civil 
disputes between the Financial Center's participants (including 
cases on restructuring of financial institutions). 
 
A.18. Foreign Direct Investment Statistics 
 
ANNUAL GROSS FOREIGN DIRECT INVESTMENT FLOWS BY COUNTRY OF ORIGIN 
(Millions of Dollars; nominal) 
      1993-2007 2008  2009 (9 months)  Total 
 
USA    25,401.0  2,068.5 1,549.6        29,019.1 
Netherlands  18,401.8  4,339.6 4,185.6           26,927.0 
UK    9,688.5  1,929.8  693.4    12,311.7 
Italy   5,690.1 693.1  473.4           6,856.6 
France   5,577.1 1,203.8  858.7   7,639.6 
Switzerland  4,974.2   182.9  321.8             5,478.9 
South Korea   2,940.9  891.1     102.5    3,934.5 
China  3,893.8 692.5    550.6   5,137.0 
Canada   3,750.8  956.2 439.89   5,146.7 
Russia   4,050.3  891.2    418.8    5,360.3 
Japan   2,796.9  456.6  372.3   3,625.7 
Turkey   1,844.3 170.9     98.9    2,114.0 
Others   19,699.9  5,601.5 2,890.6         28,192.1 
 
TOTAL   108,709.5 20,078.0  12,956.0        141,743.2 
 
 
ANNUAL GROSS FOREIGN DIRECT INVESTMENT FLOWS BY INDUSTRIES 
(Millions of U.S. Dollars; nominal) 
  1993-2007  2008  2009 (9 months) Total 
 
AGRICULTURE,  73.5  38.5  56.3    168.3 
HUNTING AND 
FORESTRY 
 
MINING AND   46, 913.9 3,107.1 3,082.8  53,103.8 
QUARRYING 
 
mining of coal 56.1  29.5  -26.9  58.7 
and lignite, 
extraction 
of peat 
 
extraction of  43,566.6  2,625.5  2,794.8  48, 986.9 
crude 
petroleum 
and natural 
gas 
 
mining of  760.9  198.4  149.2  1,108.5 
uranium and 
thorium ores 
 
mining of  2,416.8  148.7 163.9  2,729.5 
metal ores 
 
other mining 113.4 105.1  1.8   220.3 
and quarrying 
 
MANUFACTURING  10, 712.3 1,906.6 866.6   13,485.5 
 
ELECTRICITY 1,055.1  134.5  173.8  1,363.4 
GAS AND WATER 
SUPPLY 
 
CONSTRUCTION  2,013.4 449.5 338.6   2,801.5 
 
WHOLESALE AND  4,810.9 1,201.1  573.2  6,585.1 
RETAIL TRADE, 
REPAIR OF 
MOTOR VEHICLES, 
 
ASTANA 00000044  023.3 OF 027 
 
 
MOTORCYCLES 
AND PERSONAL AND 
HOUSEHOLD GOODS 
 
HOTELS AND  247.8  37.1  18.3    303.1 
RESTAURANTS 
 
TRANSPORT  2,004.2  270.3  143.9  2,418.4 
AND 
COMMUNICATION 
 
land transport 751.3  49.4  14.9   815.6 
 
including 
transport 
via pipelines 703.2  35.3  8.0    746.5 
 
water  -15.2 2.2  1.9    -11.1 
transport 
 
air transport  54.2  1.9   0.8    56.8 
 
supporting  812.7 77.0  34.0   923.7 
transport 
activities 
 
post and   401.2 139.8  92.4   633.4 
telecommunication 
 
including  390.9  138.9 91.8   621.6 
telecommunication 
 
FINANCIAL  4652.0 1,933.6 406.0  6,991.6 
ACTIVITY 
 
REAL ESTATE,  35,096.1 7,973.0 7,279.3  50,348.4 
RENTING 
AND BUSINESS 
ACTIVITIES 
 
Including 
but not limited to 
 
legal, accounting, 
book-keeping and 
auditing        368.5 149.4  73.8   591.8 
activities, 
tax consultancy, 
market research, 
business and 
management 
consultancy 
 
geological  33,679.1  7,593.1  5,860.8  47,133.0 
exploration and 
prospecting 
activities 
 
EDUCATION,  230.7  65.6  3.2   299.5 
HEALTH AND 
SOCIAL WORK 
 
ACTIVITY OF    538.8 2,960.8 14.0   3,513.6 
PROFESSIONAL 
ORGANIZATIONS, 
ASSOCIATIONS AND 
UNIONS 
 
ACTIVITIES,  360.8 0.0  0.0    360.8 
N.E.C. 
 
TOTAL          108,709.5 20,077.8 12,955.9   141,743.2 
 
ASTANA 00000044  024.3 OF 027 
 
 
Source: National Bank of Kazakhstan 
 
FDI AS PERCENTAGE OF GDP (FLOW) 
2007  2008  2009 (9 months) 
17.6% 15.2% 17% 
Source: National Bank of Kazakhstan 
 
FOREIGN DIRECT INVESTMENT (stock) IN KAZAKHSTAN BY MAJOR INVESTORS 
AND INDUSTRIES AS OF SEPTEMBER 30, 2009 (Millions of U.S. dollars) 
      Direct Investment 
TOTAL     64, 929.0 
AGRICULTURE, 
HUNTING AND FORESTRY   84.7 
including 
International Organizations 33.6 
Virgin Islands (British)  31.0 
Latvia     8.5 
Germany     0.2 
USA      0.0 
Other     11.4 
 
MINING AND QUARRYING  14,525.0 
including 
USA      6,854.3 
Netherlands     2,089.6 
China     1,314.4 
Canada     1,283.1 
Virgin Islands (British)  1,077.8 
Great Britain    450.3 
Switzerland      12.6 
Russia     125.2 
Other     1,317.6 
 
MANUFACTURING    3,166.8 
including 
Netherlands    1,966.6 
Switzerland    1,100.9 
Russia     71.6 
Luxemburg     2.7 
Other     25.0 
 
ELECTRICITY, GAS 
AND WATER SUPPLY   512.5 
including 
Netherlands    233,5 
Virgin Islands (British)  214.8 
Russia     48.6 
Other     15.5 
 
CONSTRUCTION     729.7 
including 
China     220.5 
Netherlands    103.2 
Russia     75.3 
South Korea    52.0 
Great Britain    -33.2 
Virgin Islands (British)  26.9 
Turkey     48.8 
Belgium     24.8 
Panama     1.7 
Other     209.6 
 
WHOLESALE AND 
RETAIL TRADE, REPAIR OF 
MOTOR VEHICLES, AND PERSONAL 
AND HOUSEHOLD GOODS   2,321.9 
including 
Arab Emirates    992.2 
Russia     108.7 
Netherlands    226.3 
Virgin Islands (British)  99.0 
Switzerland    13.5 
 
ASTANA 00000044  025.3 OF 027 
 
 
USA      31.5 
China     161.9 
Great Britain    42.3 
Germany     81.6 
Cyprus     59.3 
South Korea    50.9 
Turkey     83.3 
Other     371.4 
 
HOTELS AND RESTAURANTS  133.8 
including 
Virgin Islands (British)  59.0 
Turkey     31.7 
Netherlands    41.6 
Other     1.5 
 
TRANSPORT AND COMMUNICATION 742.0 
including 
Netherlands    443.5 
Great Britain    7.1 
International Organizations 1.0 
USA      53.4 
Virgin Islands (British)  70.3 
Other      166.8 
 
FINANCIAL ACTIVITY    4,544.9 
including 
Netherlands    876.0 
Austria     1,866.4 
Great Britain    175.0 
USA      142.2 
Germany     2.6 
International Organizations 289.7 
Russia     392.6 
China     102.7 
Virgin Islands (British)  151.7 
South Korea    267.4 
Other     278.6 
 
REAL ESTATE, RENTING 
AND SERVICES TO ENTERPRISES  35,117.9 
including 
Netherlands    13,509.4 
USA      4,990.8 
France     4,576.7 
Japan     2,271.8 
Liberia     2,286.4 
Virgin Islands (British)  1070.8 
Great Britain    454.9 
Other      5,957.1 
 
EDUCATION, HEALTH AND 
SOCIAL WORK     47.7 
including 
Netherlands    28,8 
Italy     7.0 
Cyprus     5.6 
Great Britain    2.4 
Virgin Islands (British)  1.5 
USA      0.8 
Russia     0.8 
Panama     0.7 
Other     0.9 
 
ACTIVITY OF PROFESSIONAL 
ORGANIZATIONS, 
ASSOCIATIONS AND 
UNIONS     3,002.3 
including 
Virgin Islands (British)  2,962.6 
Netherlands    36.0 
USA      1.8 
 
ASTANA 00000044  026.3 OF 027 
 
 
Spain     1.6 
Other     0.4 
Source: National Bank of Kazakhstan (the stock data is valued at 
market cost) 
 
FDI (stock) AS PERCENTAGE OF GDP 
as of September 30, 2009    85.04% 
 
KAZAKHSTANI DIRECT INVESTMENT OUTFLOWS (Millions of U.S. dollars, 
nominal) 
Country of 
Destination  2004-2007  2008  2009 (9 months) Total 
 
Austria   9.6    0.2   0.2    10.0 
Azerbaijan  6.7    0.1   0.4   7.2 
Armenia     7.6     2.1   0.1    9.7 
Afghanistan  0.0   0.0   0.0   0.0 
Byelorussia  4.6   30.6  0.0   35.2 
Bulgaria   1.5   1.3  0.3   3.0 
Belgium  0.1    0.0   0.0   0.1 
Great Britain  174.0  28.6  4.6    207.1 
Hungary  0.1   0.0  0.0   0.1 
Virgin Islands 448.4   257.7  -44.7  661.4 
Germany   231.5    5.9   1.1   238.5 
Guernsey  0.0   0.0  0.0   0.0 
Hong Kong  60.0   0.0   0.0   60.0 
Greece  0.1   0.0  0.0   0.1 
Georgia   116.9  11.7  3.0   131.5 
Dominican 
Republic   0.2    0.0   0.0   0.2 
Egypt  0.0   0.0  0.0   0.0 
Israel   10.6   0.4  0.0    11.0 
India  7.3   0.0  10.8    18.1 
Iran   1.6     8.8  0.0   10.4 
Ireland  0.1   0.0  0.0   0.1 
Spain  1.8   4.0  0.4   6.2 
Italy  0.1    0.0   0.0   0.1 
Canada   47.0   0.1   1.1   48.2 
Cayman Islands 1.0   0.0   1.7   2.7 
Qatar  0.0   0.0  0.1   0.1 
Cyprus  91.5   326.9  1.3   419.6 
China  63.9   34.7  4.4   103.0 
Kyrgyzstan  304.4   10.9  -34.6  349.9 
Latvia   2.2    0.0   0.1   2.3 
Libya  0.0   0.1  0.0   0.1 
Lithuania  1.1    0.0   0.1   1.2 
Liechtenstein 0.1   0.0  0.0   0.1 
Luxemburg  7.8   0.0   0.0   7.8 
Mauritius  0.1   2.8  -0.3   2.7 
Malaysia   2.2   0.7  0.0   2.9 
Marshall 
Islands  96.0   0.0  0.0   96.0 
Isle of Man    6.6   0.0   0.0   6.6 
Mongolia   0.2   3.6  0.0    3.8 
Montenegro 0.0   0.0  0.3   0.3 
Netherlands  385.5  2,347.4 3,760.8  6,493.7 
Nigeria   0.2    0.0  0.0   0.2 
Arab Emirates  52.3   28.5  8.8   89.5 
Poland  0.0   24.9  0.0   24.9 
Russian 
Federation  832.9    543.9  42.0   1,418.8. 
Seychelles 28.3   0.0  0.0    28.3 
Serbia  0.0   0.1  0.0   0.1 
Singapore  67.9   0.0  0.0    67.9 
South Korea  1.4   0.0  0.0   1.4 
USA    434.5   17.8  162.1   614.5 
Tajikistan  33.3   8.8   2.3   44.4 
Thailand      49.2   0.1   0.1    49.4 
Turkmenistan   0.0   0.1  2.0   2.1 
Turkey   378   85.8  39.9   503.7 
Uganda  0.0   0.0  0.0   0.0 
Uzbekistan  128.9  3.4  2.1   134.4 
 
ASTANA 00000044  027.3 OF 027 
 
 
Ukraine   125.5   196.4 -1.0   320.9 
France     8.3   4.4   1.9    14.6 
Check Republic 4.4   -1.6  0.1   3.0 
Switzerland  406.3  242.6  0.9   649.7 
Estonia    0.0    0.0   0.0   0.0 
Republic of 
South Africa 0.1   0.0  0.1   0.2 
Other 
Countries   15.6   9.8  11.6    36.9 
 
TOTAL  4659.4  4,244.0 4,053.0  12,956.8 
Source: National Bank of Kazakhstan 
 
SUMMARY OF INVESTMENTS AS OF 2009:  As of September 30, 2009, the 
extractive sector accounted for over 15% of the $137 billion 
invested in Kazakhstan, with U.S. firms consistently ranking as the 
largest foreign investors.  U.S. companies have invested $9.34 
billion in the extractive sector, including billion-dollar 
investments in Kazakhstan's petroleum sector by Chevron, ExxonMobil, 
and ConocoPhillips. From 1993 to 2008, Tengizchevroil, in which 
Chevron holds a 50% stake, and ExxonMobil, which owns 25%, 
contributed approximately $30.4 billion to Kazakhstani entities, 
including purchases of Kazakhstani goods and services, tariffs and 
fees paid to the state-owned companies, profit distributions to 
Kazakhstani shareholder, taxes and royalties paid to the government 
and Kazakhstani employee's salaries.  Other major foreign investors 
in this sector include the Chinese National Petroleum Corporation 
(CNPC), Shell, British Gas, Total, Agip, Lukoil, Eni, and Inpex. 
Other major U.S. investors include Philip Morris (over $320 million 
in tobacco processing) and General Electric Transportation (a 
locomotive facility).  Other major non-U.S. foreign investors 
include Arcelor Mittal and BAE Systems. 
 
HOAGLAND