Kazakhstan has made significant progress towards creating a market economy since gaining its independence from the Soviet Union in 1991. It has attracted significant foreign investment to develop its abundant mineral, petroleum, and natural gas resources. As of October 2021, the stock of foreign direct investment (FDI) totaled $170 billion, including $40.4 billion from the U.S., according to official central bank statistics. Publicly available information indicates that U.S. investments in the hydrocarbons sector alone far exceed this official statistic.
While Kazakhstan’s vast hydrocarbon and mineral reserves remain the backbone of the economy, the government continues to make incremental progress toward diversification into other sectors. The COVID-19 pandemic gave impetus to efforts by the Government of Kazakhstan (GOK) to remove bureaucratic barriers to trade and investment. The GOK maintains an active dialogue with foreign investors through the President’s Foreign Investors Council and the Prime Minister’s Council for Improvement of the Investment Climate. Kazakhstan is a member of the World Trade Organization (WTO) and the Eurasian Economic Union (EAEU).
Widespread civil unrest in January raised concerns about the country’s political and economic stability. President Tokayev has since assured foreign investors that the GOK will ensure a stable investment climate and meet its commitments to investors. He also pledged to reduce the outsized role of monopolies and oligopolies in the economy. President Tokayev announced political and economic reforms in March that may bring positive changes to the country’s investment climate by increasing privatization and combatting corruption.
Given Kazakhstan’s long border and extensive economic ties with Russia, Russian aggression against Ukraine and ensuing sanctions against Russia affect Kazakhstan’s investment climate. Some investors will likely be deterred from investing in Kazakhstan, while others may find Kazakhstan an attractive alternative to doing business in Russia. The GOK has expressed a commitment to complying with the western sanctions against Russia and has invited western investors to relocate from Russia to Kazakhstan.
Despite President Tokayev’s assurances, concerns remain that some of the underlying economic causes of the January unrest remain unaddressed and sanctions on Russia may exacerbate existing structural weaknesses to cause high inflation, currency devaluation, and logistical impediments to imports and exports. Despite institutional and legal reforms, corruption, excessive bureaucracy, arbitrary law enforcement, and limited access to a skilled workforce in certain regions continue to present challenges. The government’s tendency to increase its regulatory role in relations with investors, to favor an import-substitution policy, to limit the use of foreign labor, and to intervene in companies’ operations continues to concern foreign investors. Foreign firms cite the need for better rule of law, deeper investment in human capital, improved transport and logistics infrastructure, a more open and flexible trade policy, a more favorable work-permit regime, and a more customer-friendly and consistent tax administration.
|TI Corruption Perceptions Index||2021||102 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||79 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M, historical stock positions)||N/A||N/A||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$8,710||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Kazakhstan has attracted significant FDI since independence. As of October 1, 2021, FDI totaled $170 billion, primarily in the oil and gas sector. International financial institutions consider Kazakhstan to be a relatively attractive destination for their operations, and some international firms have established regional headquarters in the country.
Kazakhstan adheres to the OECD Declaration on International Investment and Multinational Enterprises, meaning it is committed to certain investment standards.
In April 2019, the Prime Minister created the Coordination Council for Attracting Foreign Investment. The Prime Minister acts as the Chair and Investment Ombudsman. The Investment Committee at the Ministry of Foreign Affairs and its subsidiary, KazakhInvest, handle investment climate policy issues and work with potential and current investors, while the Ministry of National Economy and the Ministry of Trade and Integration work with international organizations like the OECD, WTO, and the UN Conference on Trade and Development (UNCTAD). Each regional government designates a representative to work with investors.
The GOK established the Astana International Financial Center (AIFC), modelled on the Dubai International Financial Center. It offers foreign investors an alternative jurisdiction for operations, with tax holidays, flexible labor rules, a Common Law-based legal system, and flexibility to carry out transactions in any currency. The GOK recommends that foreign investors use AIFC for contracts with Kazakhstani businesses.
By law, foreign and domestic private firms may establish and own business enterprises. While no sectors are completely closed to foreign investors, restrictions on foreign ownership exist, including a 20 percent ceiling on foreign ownership of media outlets, a 49 percent limit on domestic and international air transportation services, and a 49 percent limit on telecom services.
Kazakhstan formally removed the limits on foreign ownership of telecom companies, except for the country’s main telecom operator, KazakhTeleCom. Still, foreign investors must obtain a government waiver to acquire more than 49 percent of shares in a telecom company. There are no constraints on the participation of foreign capital in the banking and insurance sectors. However, law limits the participation of offshore companies in banks and insurance companies and prohibits foreign ownership of pension funds and agricultural land. Foreign citizens and companies are restricted from participating in private security businesses.
Kazakhstan does not have a screening system in place and does not have legislation specifically focused on the national security implications of FDI akin to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Kazakhstan’s central bank (the National Bank of Kazakhstan) collects standard statistics on FDI and other forms of investments, but mostly for macroeconomic purposes.
Foreign companies remain concerned about the risk of preferences for domestic companies and mechanisms for government intervention in foreign companies’ operations, particularly in procurement. The Front Office for Investors assists with investors’ challenges and brings them to the Prime Minister’s Council.
The OECD Investment Committee presented its second Investment Policy Review in June 2017, available at: https://www.oecd.org/countries/kazakhstan/oecd-investment-policy-reviews-kazakhstan-2017-9789264269606-en.htm
The OECD review recommended Kazakhstan undertake corporate governance reforms of state-owned enterprises (SOEs), implement a more efficient tax system, further liberalize its trade policy, and introduce responsible business conduct principles and standards.
Kazakhstan has taken steps to simplify procedures for starting and operating businesses. Most procedures can now be done online. For example, online registration of any business is possible through the unified government website https://egov.kz/cms/en/services/business_registration/pass042com_mu .
Non-residents must have a business immigrant visa and submit electronic copies of their IDs, as well as any certification of their companies from their country of origin. Documents must be translated and notarized. Investors may learn more about these services here: https://invest.gov.kz/invest-guide/business-starting/
A foreign-owned company registered in Kazakhstan is considered a domestic company for purposes of currency regulation. Residents may open bank accounts in foreign currency in Kazakhstani banks.
In 2021, the GOK introduced a special three percent retail tax for 114 types of small and medium-sized businesses that have been affected the most by the pandemic, available for two years. The GOK also introduced an investment tax credit allowing entrepreneurs to defer taxes for up to three years. In 2020, the government approved new measures aimed to attract FDI. For example, the government introduced a new type of investment agreement (see details in Section 4). In January, Kazakhstan re-instituted visa-free travel for citizens of 54 countries, including the United States, Great Britain, Germany, and Japan.
The AIFC offers legal arrangements not normally available under Kazakhstani law, including trusts. AIFC residents have access to simplified procedures for obtaining investor visas.
Foreign investors often complain about problems with finalizing contracts and licensing. Tax errors still have not been decriminalized. The controversial taxation of dividends of non-residents came into force in January 2021.
The government neither incentivizes nor restricts outward investment.
3. Legal Regime
National legislation is enacted by the Parliament and President. The government, ministries, and local executive administrations issue regulations and executive acts in compliance with national laws. Publicly listed companies adhere to international financial reporting standards, but accounting and valuation practices are not always consistent with international best practices.
The government does not require companies to disclose environmental, social, and governance (ESG) data. Companies listed on the Kazakhstan Stock Exchange (KASE) and Astana International Exchange (AIX), must, however, disclose information on ESG.
All laws and decrees of the President and the government are available in Kazakh and Russian on the websites of the Ministry of Justice: https://adilet.zan.kz/rus and http://zan.gov.kz/en/ . The government consults on some draft legislation with experts and the business community; draft bills are available for public comment at https://legalacts.egov.kz under the Open Government section. The process of public comments seems overregulated. Publication occurs without broad notifications, some bills are excluded from public comment, and those who want to participate must register in advance. The legal and regulatory process is opaque.
Implementation and interpretation of commercial legislation sometimes creates confusion. In 2016, the Ministry of Health and Social Development introduced new rules on attracting foreign labor, some of which created significant barriers for foreign investors. After active intervention through the Prime Minister’s Council, the government canceled the most onerous requirements.
Decrees and legislative changes frequently do not “grandfather in” existing investments. Penalties are often assessed for periods prior to the change in policy.
The new OECD-compliant Environmental Code (Eco Code) mandates that local authorities spend 100 percent of environmental payments on environmental remediation.
Public financial reporting, including debt obligations, are published by the National Bank of Kazakhstan at https://nationalbank.kz/en/news/vneshniy-dolg and, in a very limited scope, by the Ministry of Finance on its site: https://www.gov.kz/memleket/entities/minfin/press/article/details/17399?directionId=261&lang=ru .
The Civil Code establishes commercial and contract law principles. The judicial system is officially independent of the executive branch, although the government interferes in judiciary matters. Freedom House’s 2021 Nations in Transit report gave Kazakhstan a very low score (1.25 out of seven) in the Judicial Framework and Independence category, implying that the executive branch effectively dominates the judicial branch. Allegations of pervasive corruption of the courts and the influence of the ruling elite results in low public expectations and trust in the justice system.
Parties to commercial contracts, including foreign investors, can seek dispute settlement in Kazakhstan’s courts or international arbitration, and courts nominally enforce arbitration clauses in contracts. However, the Post is aware of at least one case when the government is alleged to have refused to honor a fully litigated international arbitral decision.
The AIFC has its own arbitration center and court based on British Common Law and is independent of the judiciary. The government advises foreign investors to use the capacities of the AIFC arbitration center and the AIFC court more actively.
Laws provide for non-expropriation, currency convertibility, guarantees of legal stability, transparent government procurement, and incentives for priority sectors. The Entrepreneurial Code outlines basic principles of doing business, the government’s relations with entrepreneurs, and codifies non-discrimination for foreign investors. The code contains incentives and preferences for government-determined priority sectors.
A law on Currency Regulation and Currency Control expands the statistical monitoring of transactions in foreign currency and facilitated the process of de-dollarization. The law treats branches of foreign companies in Kazakhstan as residents and enables the National Bank of Kazakhstan (NBK) to enhance control over cross-border transactions.
The Entrepreneurial Code regulates competition-related issues such as cartel agreements and unfair competition. The Agency for Protection and Development of Competition is responsible for reviewing transactions for competition-related concerns. Regulation of natural monopolies remains with the Ministry of National Economy.
The bilateral investment treaty between the United States and Kazakhstan requires the government to provide compensation in the event of expropriation. The Entrepreneurial Code allows the state to nationalize property in emergency cases but fails to provide clear criteria for expropriation or to require prompt and adequate compensation at fair market value.
The Mission is aware of cases where owners of flourishing and developed businesses have been forced to sell their businesses to companies affiliated with high-ranking and powerful individuals. In 2021, the government amended the Criminal Code and enhanced punishment for raiding by increasing the possible sentence to a range of five to eight years.
One hydrocarbons company claims expropriation. The case went to international arbitration and the legal process continues without resolution.
Bankruptcy Law protects the rights of creditors during insolvency proceedings. Bankruptcy is not criminalized, unless the court determines the bankruptcy was premeditated, or rehabilitation measures are wrongful. The law eases bureaucratic requirements for bankruptcy filings, gives creditors a greater say in continuing operations, introduces a time limit for adopting rehabilitation or reorganization plans, and adds court supervision requirements.
4. Industrial Policies
The Entrepreneurial Code and Tax Code incentivize foreign and domestic investment in priority sectors, which include agriculture, metallurgy, extraction of metallic ores, chemical and petrochemical industries, textile and pharmaceutical industries, food production, machine manufacturing, waste recycling, and renewable energy. Firms in priority sectors receive tax and customs duty waivers, in-kind grants, investment credits, and simplified work permits.
Model investment contracts are prepared and signed for investment priority projects by the Investment Committee of the Ministry of Foreign Affairs and KazakhInvest. Details on their requirements are available here: https://invest.gov.kz/doing-business-here/regulated-sectors/ .
In January 2021, the government added investment agreements to the Entrepreneurial Code. Such projects exceed $50 million in industries selected by the government. Only Kazakhstan companies or residents of the AIFC are eligible. Under this agreement, the government provides incentives and a stabile legal regime for 25 years.
A U.S. investor signed the first investment agreement of this type in January 2021. The government will establish a special economic zone with tax and customs preferences.
The government offers incentives for clean energy investments by facilitating the sale of electricity generated by renewable energy sources (RES). The Financial Settlement Center of Kazakhstan’s Electric Grid Operating Company guarantees purchases of electricity produced from RES and connects RES to the grid on a priority basis.
The Law on Special Economic Zones allows foreign companies to establish enterprises in special economic zones (SEZs), simplifies permit procedures for foreign labor, and establishes a special customs zone regime not governed by EAEU rules. Kazakhstan has thirteen SEZs.
Kazakhstan altered its local content requirements to meet WTO accession requirements. Subsoil use contracts concluded after January 1, 2015, no longer contain local content requirements, and any local content requirements in contracts signed before 2015 phased out on January 1, 2021.
The GOK established a fund for the development of local content. The fund invests in technology, IT, assembly of oil and gas equipment, and environmental projects.
In 2021, Kazakhstan introduced a scoring system for localization to stimulate local assembly of vehicles and agricultural equipment.
Foreign investors may participate in government and quasi-government procurement tenders, if they have established production facilities in Kazakhstan and are recognized as a pre-qualified bidder. The product must be made in Kazakhstan and be on the register of trusted producers. The pandemic has amplified the import substitution trend.
The GOK introduced significant recycling fees on imported combines and tractors. The government contends that the fee is applied to foreign and domestically produced vehicles, combines and tractors; however, it subsidizes the fee for domestic producers. Foreign companies consider this to be coercion to localize production. The government announced a 50-percent decrease in the recycling fee rate after President Tokayev publicly criticized the fee, but this change has not yet come into force.
Cross-border transmission of data is possible if countries receiving this data provide data protection. The National Security Committee and the Ministry of Digital Development, Innovations and Aerospace Industry supervise data protection and data storage in Kazakhstan.
5. Protection of Property Rights
Secured interests in property (fixed and non-fixed) are recognized under the Civil Code and the Land Code. Agricultural land and certain other natural resources may only be owned or leased by Kazakhstani citizens.
In May 2021, President Tokayev signed into law amendments which prohibit foreigners, persons without citizenship, foreign legal entities and legal entities with foreign participation, international organizations, scientific centers with foreign participation, and repatriated Kazakhs from owning or leasing agricultural lands.
The legal structure for intellectual property rights (IPR) protection is relatively strong; however, enforcement needs further improvement. Kazakhstan is not currently included in the United States Trade Representative’s (USTR) Special 301 Report. To facilitate its accession to the WTO and attract foreign investment, Kazakhstan continues to improve its legal regime for protecting IPR. The Civil Code and various laws protect U.S. IPR. Kazakhstan has ratified 18 of the 24 treaties endorsed by the World Intellectual Property Organization (WIPO): https://wipolex.wipo.int/en/treaties/ShowResults?country_id=97C
The Criminal Code sets out punishments for violations of copyright, rights for inventions, useful models, industrial patterns, selected inventions, and integrated circuit topographies. The law authorizes the government to target internet piracy and shut down websites unlawfully sharing copyrighted material, provided that the rights holders had registered their copyrighted material with the IPR Department at the Ministry of Justice. Despite these efforts, the use of pirated software remains high.
Kazakhstan amended its legislation to comply with OECD IPR standards. The law set up a more convenient, one-tier system of IPR registration and provided rights holders the opportunity for pre-trial dispute settlement through the Appeals Council at the Ministry of Justice.
Authorities conduct nationwide campaigns called “Hi-Tech” and “Anti-Fraud” that are aimed at detecting and ceasing IPR infringements and increasing public awareness about IP issues. In 2021, these campaigns resulted in the seizing of 3,500 units of counterfeit goods and closing access to 40 foreign websites selling pirated software. In 2021, the Agency for Financial Monitoring filed 11 criminal cases for IPR violations worth more than $4.2 million.
Foreign companies complain of inadequate IPR protection. Judges, customs officials, and police officers lack IPR expertise, which exacerbates weak IPR enforcement.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=KZ .
6. Financial Sector
Capital markets remain underdeveloped and illiquid, with small equity and debt markets dominated by SOEs and lacking in retail investors. Most domestic borrowers obtain credit from Kazakhstani banks, although foreign investors often find interest rates and collateral requirements onerous, and it is often cheaper and easier for foreign investors to use retained earnings or borrow from their home country. The government actively seeks to attract portfolio investment. Foreign clients may only trade via local brokerage companies or after registering at KASE or at the AIFC.
KASE, with 233 listed companies, trades a variety of instruments, including equities and funds, corporate bonds, sovereign debt, international development institutions’ debt, foreign currencies, repurchase agreements (REPO), and derivatives. KASE launched a new global platform on November 15, which currently trades over 40 U.S. securities listed on NASDAQ and the New York Stock Exchange.
The AIFC has its own stock exchange (AIX), that has partnered with the Shanghai Stock Exchange, NASDAQ, Goldman Sachs International, the Silk Road Fund, and others. AIX currently has 134 listings in its Official List, including 99 traded on its platform.
Kazakhstan is bound by Article VIII of the International Monetary Fund’s Articles of Agreement which prohibits government restrictions on currency conversions or the repatriation of investment profits. Money transfers associated with foreign investments are unrestricted; however, Kazakhstan’s currency legislation requires that a currency contract must be presented to the servicing bank if the transfer exceeds $10,000. Money transfers over $50,000 require the servicing bank to notify the transaction to the authorities.
President Tokayev signed a decree banning the export of foreign currency cash exceeding $10,000 or its equivalent starting March 14.
Kazakhstan had 22 commercial banks as of January 1. The five largest banks (Halyk, Sberbank-Kazakhstan, Kaspi, Otbasy, and First Heartland Jusan) held assets of approximately $57.6 billion, accounting for 66.1 percent of the total banking sector.
The banking system has been impaired by legacy non-performing loans, poor risk management, weak corporate governance practices, and significant related-party exposures. The GOK has undertaken measures to strengthen the sector, including capital injections, enhanced oversight, and expanded regulatory authorities. As of January, the ratio of non-performing loans to banking assets was 3.4 percent, down from 8.6 percent in April 2019, while the number of commercial banks decreased to 22 from 28 in April 2019 as a result of mergers and liquidation of financially struggling entities.
The United States and other countries have imposed sanctions on multiple Russian financial institutions, some of which have subsidiaries in Kazakhstan.
Kazakhstan has a central bank system led by the NBK and the Agency for Regulation and Development of the Financial Market (ARDFM). ARDFM is the main financial regulator overseeing banks, insurance companies, the stock market, microcredit organizations, debt collection agencies, and credit bureaus, while the NBK performs core central bank functions, as well as management of the country’s sovereign wealth fund and pension system assets. The NBK and ARDFM are committed to the incremental introduction of the Basel III regulatory standard. Kazakhstan allows foreign banks to operate in the country via branches. Foreigners may open bank accounts in local banks if they have a local tax registration number.
The National Fund of the Republic of Kazakhstan was established to support the country’s social and economic development, as well as to reduce the country’s dependence on the oil sector and external shocks. The National Fund’s assets are generated from direct taxes and other payments from oil companies, public property privatization, sale of public farmlands, and investment income. As of January 1, the National Fund’s assets were $55.3 billion or around 30 percent of GDP. The government receives regular transfers from the National Fund for general state budget support, as well as special purpose transfers ordered by the President. The National Fund is required to retain a minimum balance of no less than 30 percent of GDP.
Kazakhstan is not a member of the IMF-hosted International Working Group of Sovereign Wealth Funds.
7. State-Owned Enterprises
According to the National Statistical Bureau, as of January 1, there are 25,201 state-owned enterprises (SOEs) and 617 enterprises where the state has some stake, including all types of enterprises, from small veterinary inspection offices, kindergartens, and regional hospitals, to airlines, mining companies, and the national oil and gas company. A full list of SOEs is available at: https://gr5.gosreestr.kz/p/en/gr-search/search-objects .
SOEs play a leading role in the country’s economy. According to the 2017 OECD Investment Policy Review, SOE assets amount to $48-64 billion, approximately 30-40 percent of GDP; net income was approximately $2 billion. In January, President Tokayev enabled the Agency for Development and Protection of Competition to endorse the creation of new state-owned enterprises and to review enlargement of existing ones. Parastatal companies benefit from greater access to subsidies and other government support.
The National Welfare Fund Samruk-Kazyna (SK) is the largest national holding company, managing key SOEs in the oil and gas, energy, mining, transportation, and communication sectors. The IMF reports that, as of 2019, SK held assets equivalent to 38 percent of GDP and generated revenues of 15 percent of GDP, which was equivalent to three-quarters of total government revenue. In 2020, SK reported $54 billion in assets and $1.4 billion in consolidated net profit.
Political influence continues to dominate SK. SK has special rights to conclude large transactions among members of its holdings without public notification, a pre-emptive right to buy strategic facilities and assets and is exempt from government procurement procedures. More information is available at http://sk.kz/.
Two other major SOEs are the national managing holding company Baiterek and national information holding company Zerde. More information about both companies is available on their web-sites: https://www.baiterek.gov.kz/en and http://zerde.gov.kz/.
Officially, private enterprises compete with public enterprises under the same terms and conditions. In some cases, SOEs enjoy better access to natural resources, credit, and licenses than private entities.
The government enacted a new comprehensive privatization program in 2020. More information is available at: https://privatization.gosreestr.kz/ .
As of March 31, the government has sold 938 organizations for $1.7 billion out of 1,747 organizations subject to privatization. The government sells small, state owned and municipal enterprises through electronic auctions. Foreign investors may participate in privatization projects. However, they may experience challenges in navigating the process.
8. Responsible Business Conduct
Entrepreneurs, the government, and non-governmental organizations are aware of the expectations of responsible business conduct (RBC). Kazakhstan continues to make steady progress toward meeting the OECD Guidelines for Multinational Enterprises, and the government promotes the concept of RBC. The OECD National Contact Point is the Ministry of National Economy.
The Entrepreneurial Code has a section on social responsibility, which is defined as a voluntary contribution for the development of social, environmental, and other spheres. This creates conditions for RBC but cannot force entrepreneurs to take socially responsible actions. The code considers charitable contributions as a form of social responsibility and envisions tax preferences for entrepreneurs engaged in charitable activities. The government encourages companies to donate to the Khalkyna (To the People of Kazakhstan Fund).
The government signed on to the Extractive Industries Transparency Initiative (EITI) in 2007. Kazakhstan produces EITI reports that disclose revenues from the extraction of its natural resources. Companies disclose what they have paid in taxes and other payments, and the government discloses what it has received; these two sets of figures are then compared and reconciled. In 2019, the EITI Board reported that Kazakhstan had made considerable improvements since 2017 by providing additional information on local content, social investment, and transportation of oil, gas, and minerals.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
- Xinjiang Supply Chain Business Advisory
Department of the Treasury
Department of Labor
The Eco Code includes a chapter on adaptation to climate change that focuses on the priority areas of agriculture, water management, forestry, and civil protection. Kazakhstan 2050 encourages an accelerated transition to a low-carbon economy, sets a target for the share of RES in total power mix to reach 50 percent by 2050, and promotes water-saving technologies. The Concept for Development of the Fuel and Energy Sector until 2030 aims to develop regulations and incentives to promote sustainable and renewable energy, adapt to climate change and address the challenges associated with reducing carbon dependency. The Ministry of Ecology, Geology, and Natural Resources (MEGNR) Strategic Plan 2020-2024 stipulates a regulatory approach to enable the transition to a low-carbon economy along with a decrease in greenhouse gas (GHG) emissions.
Kazakhstan’s Nationally Determined Contribution (NDC) includes an unconditional, economy-wide target of 15 percent reduction in GHG emissions by 2030 compared to 1990 and a conditional 25 percent reduction by 2030.
GOK has pollution standards for soil, water, air, and radiation. The Eco Code introduced a ten-year exemption from environmental payments for businesses committed to implementing best available technologies (BAT), with a perpetual exemption if they reached their target emission reductions. For those who did not introduce BAT, environmental payments will double in 2025, increase four-fold in 2028, and eight-fold in 2031.
Kazakhstan’s rating in Transparency International’s 2021 Corruption Perceptions Index is 37/100, where 100 is very clean and 0 is highly corrupt. According to Transparency International, the January civil unrest underscored the dangers of ignoring corruption. The Anti-Corruption Agency has focused on sectors like agriculture and healthcare, leaving out the largest industries. President Tokayev announced in January that the government would do more to combat corruption. Within months, several investigations began against wealthy and powerful individuals, including relatives of First President Nazarbayev.
According to the State Department’s Human Rights Report, the government selectively prosecuted officials who committed abuses, especially in high-profile corruption cases. Nonetheless, corruption remained widespread, and impunity existed for many in positions of authority as well as for those connected to law enforcement entities. The law provides criminal penalties for corruption by officials, but the government did not implement the law effectively. Corruption was widespread in the executive branch, law enforcement agencies, local government administrations, the education system, and the judiciary, according to human rights NGOs. Journalists and advocates for fiscal transparency report frequent harassment and administrative pressure.
The Criminal Code imposes criminal liability and punishment for corruption, forbids suspended sentences for corruption-related crimes, and provides for lifelong bans on employment in the civil service with mandatory forfeiture of title, rank, grade, and state awards for those convicted of corruption-related crimes. The Law on Public Service mandates public servants adhere to rule of law principles including anti-corruption and professionalism of civil service. However, the Law on the First President of the Republic of Kazakhstan—Leader of the Nation establishes blanket immunity for First President Nursultan Nazarbayev and members of his household from arrest, detention, search, or interrogation.
Kazakhstan’s Anti-Corruption Agency prepares an annual report on countering corruption. Kazakhstan ratified the UN Convention against Corruption. It participates in the Istanbul Anti-Corruption Action Plan of the OECD Anti-Corruption Network, the International Association of Anti-Corruption Agencies, and the International Counter-Corruption Council of CIS member-states. Kazakhstan is a member of the Group of States against Corruption (GRECO).
Corruption continues to be observed in nearly all sectors, including extractive industries, infrastructure projects, state procurements, and banking. The International Finance Corporation’s Enterprise Survey for Kazakhstan, conducted in 2019 with over 1,400 small, medium, and large enterprises, found that 12 percent of respondents had experienced at least one bribe payment request across six different transactions including paying taxes, obtaining permits or licenses, and obtaining utility connections.
Contact at the government agency responsible for combating corruption:
Anti-Corruption Agency of the Republic of Kazakhstan
37 Seyfullin Street, Nur-Sultan
+7 (7172) 909002
Contact at a “watchdog” organization:
Chairman of the Board of Governors
Transparency Kazakhstan Foundation
Rahat Palace Business Centre,
Satbayev koshesy 29/6,
10th Floor, Office 105,
A15P5A0, Almaty, Kazakhstan
+7(707) 711 4949
10. Political and Security Environment
During violent civil unrest in January, at least 237 individuals were killed and there were many instances of theft, looting, and arson. More than 1,000 government and commercial buildings were damaged in Almaty and several other cities and rioters briefly seized Almaty International Airport. President Tokayev stated that the initial economic damages were estimated at $2-3 billion. After restoring order, President Tokayev assured foreign investors that the GOK would ensure a stable investment climate.
11. Labor Policies and Practices
The OECD Skills Strategy project showed in 2021 that the country is improving rapidly in the use of skills at work, particularly digital skills. However, the skills of youth remain substantially below the OECD average. Adults also possess comparatively weak foundational and problem-solving skills, as the culture of adult learning is under-developed.
The State Program of Education and Science Development 2020-2025 seeks to reduce the gap in educational achievement between urban and rural schools and to improve lifelong learning.
Many large investors rely on foreign workers to fill the void. The government regulates foreign labor; foreign workers must obtain work permits.
The GOK has made it a priority to ensure that Kazakhstani citizens are well represented in foreign enterprise workforces. The government is particularly keen to see Kazakhstanis hired into the managerial and executive ranks of foreign enterprises.
Kazakhstan joined the International Labor Organization (ILO) in 1993 and has ratified 24 out of 189 ILO conventions.
The Constitution and Labor Code guarantee basic workers’ rights, including occupational safety and health, the right to organize, and the right to strike. On May 4, 2020, the government enacted amendments to labor-related laws, including the trade union law, to bring them closer to compliance with ILO standards. The three independent labor unions – the Federation of Trade Unions of the Republic of Kazakhstan (FTUK), Commonwealth of Trade Unions of Kazakhstan Amanat, and Kazakhstan Confederation of Labor (KCL) – had over three million members, or 40 percent of the workforce, as of March 1, 2020. According to the FTUK, as of January 2021, 1.5 million workers, or 90.2 percent of FTUK members, labored with collective bargaining agreements in 2020. The number of collective agreements countrywide increased 19.1 percent from 120,200 in 2019 to 143,571 in 2020, the latest data available.
The Labor Code describes a mechanism for resolution of individual labor disputes via direct negotiations with an employer, mediation commission, and court. It identifies a mechanism for resolution of collective labor disputes via direct negotiations with an employer, mediation commission, labor arbitration, and the court. Workers’ right to strike are limited. Courts have the power to declare a strike illegal at the request of an employer or the Prosecutor General’s Office. Employers may fire striking workers after a court declares a strike illegal. Please see additional details at the Human Rights Report at: https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/kazakhstan/.
Complaints about low wages, poor social benefits, and substandard working conditions resulted in over 363 strikes and labor disputes in 2021 and dozens in the first three months of 2020. Workers typically ended strikes after the companies’ management agreed to a partial increase of wages and bonuses.
The average salary for men was 21.7 percent higher than that for women in 2021. The official unemployment rate is 4.9 percent, or around 450,000 unemployed people out of 9.2 million working-age Kazakhstanis. In March, KPMG estimated that the real unemployment rate was 10 percent in 2019, 12 percent in 2020, and may increase to 20 percent in 2022.
The GOK reported in 2020 that 1.22 million citizens (or about 13.5 percent) of the country’s workforce worked in the informal economy. Informal workers were concentrated in the retail trade, transport services, agriculture, real estate, beauty and hair dressing salons, and laundry and dry-cleaning businesses. Small entrepreneurs and their employees for the most part worked without health, social, or pension benefits, and did not pay into the social security system.
14. Contact for More Information
U.S. Embassy Nur-Sultan Economic Section
3, Qoshkarbayev Str., Nur-Sultan
+7 7172 70 21 00
American Chamber of Commerce (AmCham) in Kazakhstan www.amcham.kz