Kazakhstan: A Presidential Visit
In light of the President of Kazakhstan’s recent visit, Venetia van Kuffeler discusses investment relations, WTO membership, EXPO-2017 and more with the country’s Ambassador, Erzhan Kazykhanov
1. What was on the President’s agenda for his visit to the UK in early November?
The programme of HE Mr Nursultan Nazarbayev’s visit to the UK was intense, and included meetings with UK political leaders and representatives from British business.
The most important event was the President’s official lunch with Her Majesty Queen Elizabeth II. For the first time in history, Kazakhstan’s national anthem was played by the Guard of Honour at Buckingham Palace.
Another landmark event was meeting with Prime Minister David Cameron at 10 Downing Street, followed by the signing of some important documents: the Mutual Legal Assistance Treaty, an MoU on cooperation in the field of civil service, and an agreement on the UK’s participation in Astana EXPO-2017.
With Britain’s leading role in the global economy in mind, special attention was paid to expanding trade and investment relations between Kazakhstan and the UK on the trip. The President and Prime Minister took part in the opening of the Kazakh-British Intergovernmental Commission, reaffirming our strategic partnership and willingness to further strengthen bilateral collaboration across the breadth of our shared interests.
Lord Rothschild kindly hosted a dinner at Spencer House in honour of President Nazarbayev. This event was attended by the CEOs of a number of British companies, and was a good opportunity to discuss possible projects to be launched in Kazakhstan. Guests included representatives from ArcelorMittal, Barclays, BG Group, De La Rue, Glencore, Hinduja Group Limited, Royal Dutch Shell, Rio Tinto, RIT Capital Partners, Spearhead International, The Telegraph Group and Vitol Group, as well as Minister of State for Trade and Investment Lord Maude, and UK Commissioner for EXPO-2017 Professor Charles Hendry.
2. With the Kazakhstan President’s recent meetings with the US and Chinese Presidents and participation in the UN General Assembly, the country is more prominent on the global stage than ever. What does Kazakhstan hope to achieve from his recent visit to the UK?
First of all, the visit has advanced Kazakh-British relations to a totally new level in all spheres of mutual interest.
A key moment in our relationship was when David Cameron made his first historic visit to Kazakhstan in the summer of 2013. Since then we have been consistently bolstering our cooperation across a wide range of issues, strengthening ties between ministerial departments and parliaments and the bilateral institutional framework.
Our crucial priority, however, is to deepen trade and investment ties. The key focus today is no longer solely on extraction of the minerals and finding additional financial resources. Our challenge now is to drive and accelerate the industrialisation, modernisation and diversification of our economy through the adoption of world-leading technology and expertise. We are actively seeking the support of UK companies to help deliver this goal. During the visit, over 20 agreements and commercial contracts were signed, with a value of over US$12 billion. These contracts covered the hydrocarbons and renewable energy sector, mining and pharmaceutics, financial, professional and legal services. The agreements have huge potential for future business opportunities between our countries, and reinforce London’s position as the leading investor in our region. It also reflects the UK’s commitment to assist us in accessing financial markets, supporting Astana to realise ambitious plans to become an international financial centre.
3. What are the key implications of the 2015 Presidential elections held in Kazakhstan in April 2015?
In May 2015, after early presidential elections in Kazakhstan and taking a new mandate from our people, President Nursultan Nazarbayev launched a new ‘Plan for the Nation,’ focusing on five key institutional reforms and 100 concrete steps to implement them.
One of the most substantial reforms includes establishing a modern, professional and autonomous state apparatus. This includes the formation of a modern, professional and independent public service, finding new forms of recruitment or even appointing foreign citizens to key positions in the government.
We are also keen to improve the country’s performance in strengthening the rule of law in order to reinforce foreign and domestic investors’ trust in Kazakhstan’s judicial system. This involves a three-level justice system, improving the public image of the police and ensuring property rights.
In terms of trade and investment, we are interested in establishing an International Financial Centre in Astana (AIFC) with a special status and separate judicial rules based largely on English law.
We must also move towards making our government more transparent and accountable. State bodies will report to the general public, and be assessed by society based on the effectiveness of their work. This ‘open government’ policy will include financial transparency, evaluation of the effectiveness of public policy, etc. On 30 November, President Nazarbayev set out a number of tasks to accelerate these benefits in his annual address to the people of Kazakhstan. This included concrete measures to secure our economic growth, and to reform public and corporate management, financial and social sectors.
These various reforms will make strong contributions to upgrading Kazakhstan’s social development processes. The main goal is shaping a ‘Nation of Common Future’ by forming a broad middle class – the milestone of a successful nation – which is achieved by sustaining the genuine rule of law, with modern political, economic and civil institutions in society.
So far our government has drafted all 100 steps of reforms into 59 parliamentary bills. Almost half of them have already been approved by Parliament. And as stated by our President – implementation, the hardest part, is yet to follow.
All the steps undertaken to establish a strong, transparent and accountable state are based on the national idea of Mangilik El (‘Eternal Nation’), which serves as a powerful basis for building a new Kazakhstan in the twenty-first century.
4. Your President has said that joining the WTO will facilitate Kazakhstan’s integration into the world economy and help the country enter the list of 30 leading countries by 2050. What are the key growth areas in helping Kazakhstan to achieve this?
Kazakhstan’s full membership of the WTO is an endorsement of the extensive reforms undertaken by the country’s government, and a clear message to the world community that our country is open for business.
We have a clear vision of our ongoing success – our ambition is to be one of the 30 most developed countries in the world by 2050. This will not be an easy goal to reach. Competition from other rapidly developing economies will be intense. To succeed, our GDP per capita will need to rise almost fivefold.
We understand that the next phase of our development will call for a new approach to growth, based on the diversification of our economy, and investment in our people to build productivity and create a skilled workforce. It will also drive demand for large-scale infrastructure to connect our vast country better, a stronger private sector to help our citizens open their own businesses and to innovate, and large-scale improvements in education and healthcare to invest in our future generations. Moreover, we would need greater empowerment of civil society.
This long-term ambition is supported by actions taken in the medium-term. In 2014, we launched a plan for the next three years to help advance our vision while managing the aftermath of the financial crisis. Called NurlyZhol (‘The Bright Path’), this programme involves a US$24 billion investment to boost the economy with improved infrastructure and business development over the next three years.
Our plan is rooted in tight fiscal policy and accommodates a revised macroeconomic forecast based on an average oil price of US$50 per barrel. The plan also ensures we continue to be a competitive and attractive economy. In this regard, we are offering significant investment incentives, such as corporate tax at 0 per cent, 30 per cent capital rebates on qualified investments, and ‘one stop shop’ support for businesses.
Within the overall programme, US$9 billion will be invested over three years from our National Fund, complemented by a further US$9 billion investment from the European Bank for Reconstruction and Development, The World Bank, Asian Development Bank and Islamic Development Bank. This investment will provide a vital stimulus that will act as a catalyst for the deployment of further private capital.
5. Between 2000 and 2010 Kazakhstan was the third fastest growing economy in the world. Kazakhstan’s importance as an economic power is obviously on the rise. can you outline some of the reasons for this?
In the two decades since gaining our independence from the Soviet Union, Kazakhstan has come a long way. Back then our economy was in ruins. There was no private sector. Inflation and unemployment were rampant, and we struggled to provide even basic public services.
We had to start from scratch and rebuild almost everything, and the transformation has been remarkable. Under the leadership of President Nazarbayev, GDP per capita has increased 15 times over the past 20 years. With GDP now at US$13,000 per capita, The World Bank classifies Kazakhstan as an ‘upper middle-income’ nation.
Over the same period, unemployment has been halved. In the past decade alone, Kazakhstan’s economic growth has more than doubled, making it one of the ten highest performing economies in the world. We are a net creditor to the world, with over US$100 billion in foreign exchange reserves and financial assets.
Since independence, Kazakhstan has attracted over US$200 billion dollars of foreign direct investment – some three quarters of all FDI that flowed into Central Asia. This investment trend is accelerating – half of this amount has come to Kazakhstan since 2008. The majority of this investment has come from the Netherlands, US, China, UK, France, Italy, Russia and Canada.
These investment statistics demonstrate de facto that Kazakhstan’s economy has already become an integral part of the global economy. In this regard, Kazakhstan’s full membership of the WTO will de jure formalise its contribution to the global trade and investment flows.
Looking at the structure of Kazakhstan’s exports and FDI, one should note that almost 70 per cent of our exports to the global market are represented by hydrocarbons and other raw materials, and a similar share of the total volume of FDI has been made to the oil and gas, and mining sectors of the national economy.
So Kazakhstan’s key economic priority is to ensure sustainable economic growth through through diversifying the economy and reducing its dependency on volatile world prices for exports of primary commodities, as well as through creating a favourable climate for investment into the processing industries sector.
6. What are Kazakhstan’s hopes for EXPO-2017?
EXPO-2017 is an excellent opportunity for Kazakhstan to showcase not only its unique history and culture, but also to demonstrate its achievements and innovative strength.
As a national project, EXPO-2017 is expected to give a powerful boost to further diversification and modernisation of our economy. In the short-term, thousands of new jobs will be created, and we are keen to achieve new horizons for the tourism, hotel and service sectors, as well as the development of small and medium-sized businesses. Furthermore, this global exhibition will give fresh impetus to developing science, technology and culture.
As for the legacy of EXPO-2017, from January 2018 EXPO-town will form the already mentioned AIFC. We are confident that the AIFC will be the core of Kazakhstan’s financial infrastructure, and in the future will turn into a financial hub for the whole Central Asian region.
7. What do you think is Kazakhstan’s greatest diplomatic challenge?
The general objectives of our diplomacy were reflected in Kazakhstan’s Foreign Policy Concept until 2020, which was approved by President Nursultan Nazarbayev in 2014. It states that Kazakhstan has entered the third decade of its independence as an established and stable state, with a dynamically developing economy and clearly set foreign policy priorities.
Today, our foreign policy requires modernisation and promotion of national interests on the basis of principles of pragmatism. This process is influenced by a range of internal and external factors. Internally, I would highlight the political and socio-economic development of Kazakhstan, the completion of our transformational stage and a move towards a new strategy of long-term sustainable development until 2050.
External factors include the need to overcome the global financial crisis, along with tackling certain emerging geopolitical and geo-economic issues on both a regional and global scale.
During 24 years of independence, Kazakhstan has persistently built good relations and strong economic ties with all states concerned, regardless of their size and power, in both neighbouring and distant locations. We have close links with Russia and China, at the same time as having Europe and the US as our biggest trading partners and foreign investors.
This is not an accident but the result of our constant multi-vector foreign policy. In other words, with the benefit of hindsight, Kazakhstan aims to be a part of the Great Gain, not the Great Game, in Central Asia.
Today, when the importance of the region is gradually growing while the global economic centre of gravity shifts eastwards, reviving trade links, fast-growing markets and new areas of prosperity, Kazakhstan is planning to turn its so called ‘landlockedness’ to ‘landlinkedness,’ reaffirming its position at the heart of this new emerging world.
In the mid-term, we are working hard to promote Kazakhstan’s bid for a non-permanent seat at the UN Security Council for 2017-2018, and maintaining wide international participation in Astana EXPO-2017.
Beyond these tasks, this month (December), our foreign policy will celebrate at least two major achievements: successful accession to WTO and the signing of the EU-Kazakhstan Enhanced Partnership and Cooperation Agreement. Both of these achievements would not be possible without the support of our British partners.
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