Doing business
Business opportunities
According to the World Bank’s ‘Doing Business’ ratings, Kazakhstan ranked 59th in 2010, ahead of its nearest neighbours China and Russia, as well as the Czech Republic and Ukraine. Some important changes to improve the business climate have taken place in recent years, including improving credit facilities, development of the banking system and opening private credit bureaux. The government reduced the tax burden on companies by lowering social (payroll) tax in 2008 and corporate profits tax in 2009. In 2010 Kazakhstan eased business start-up costs by reducing the minimum capital requirement to 100 tenge ($0.70) and strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan also took steps to speed up trade through modernisation of its notorious customs system, including implementation of a risk management system, improvements in customs automation and harmonisation of the customs code and tariffs under the Customs Union. Kazakhstan and China are building a large, modern customs handling facility on their shared border.
Business etiquette
Business tips
As with any international market, Kazakhstan has its own way of doing business and unique social norms. For Australian exporters, it is important to take time to understand how business is done in Kazakhstan and how to maximise opportunities for success in your business dealings.
Kazakhstan is a vibrant Asian country with rich traditions and respect for cultural norms. Historically, the country was home to many religions, peoples and nations and therefore it is open to religious and cultural diversity. At the same time, the country is quite modernised and some business is conducted in a western way, although remnants of the former system remain noticeable.
As an Asian society, in Kazakhstan, strong personal relationships are critical to business success. At the first meeting, Kazakhs may seem not particularly open, but in due course and especially in informal settings Kazakhs usually appear quite friendly. Hence face-to-face business meetings are vital to establish a rapport that can underpin successful business relationships.
Here are a few pointers that can help you achieve successful outcomes:
- Be prepared to deal with various types of management. Some government officials, particularly those who are based in the remote regions, may still be operating in a Soviet bureaucratic way, while elderly businessmen are conducting business in a spirit of Asian personalised traditions. A new generation of young, multilingual managers can appear to have Westernised manners.
- If possible, translate your most important materials into both Kazakh and Russian (the latter is widespread as a language of general communication, but the official language of the country is Kazakh). It may be helpful to learn some basic Kazakh words, particularly in dealing with people from rural areas.
- Many Kazakh business people speak English, but they will be more accustomed to American or British accents. Minimise use of slang and provide clear, concrete explanations.
- When negotiating, remember that as in all Asian societies, potential business partners are used to negotiate the price and will expect several offers and counter-offers before a mutually acceptable price is reached.
- It is important to follow up on the phone, on email and even in person to build relationships with potential business partners and customers. Some business people still do not have established formal procedures, do not keep records of meetings and therefore some gentle reminders and timely follow up are essential.
- On the other hand, there are many cases when potential buyers may even want to sign contracts on the same day. Be prepared that decisions can be made in a radically different manner – some could take a minute and for some you may need to wait for months. The government system and quasi-government structures could be particularly slow while private businessmen are often quick to decide on deals. Do not be discouraged if your Kazakh business partners are slow to respond to emails; this does not always imply disinterest. Wait an appropriate time then follow up again, preferably via phone.
- Business may often be held in the restaurants or homes as Kazakhs are very hospitable and like to seal their deals in informal environment, often with numerous toasts and sometimes with vodka.
- Kazakh partners generally respect promised delivery dates and production quantities but there could be cases when they allow failures from their side. Therefore, you should be careful with your Kazakh partners as not all of them may keep the agreed deadlines and commitments. It is useful to regularly reinforce your understanding of terms and timetables.
- Kazakh business people tend to dress quite formally. A business suit and tie is expected attire for men. For women similar guidelines apply. Pant suits are fully acceptable in Kazakhstan. It is preferable to dress well and conservatively to create the right first impression.
- Appointments are generally kept. However, in the business climate in Kazakhstan, meetings can be frequently cancelled or timings changed because other ‘urgent’ issues arise.
- Government (‘the state’) still plays a big role in business operations in Kazakhstan. In many cases, your partner may need to seek various licenses and certifications from the state authorities and this could be both time consuming and costly. If your partner requests documentation for government approvals, pay close attention to the required procedures and documents, as small mistakes can lead to delays and additional costs.
- Exchanging gifts at the end of a meeting is quite common. Kazakh business people will often present you with ceremonial gifts and will appreciate thoughtful and uniquely Australian gifts in return. While an exchange of ceremonial gifts can be appropriate, you should be aware of Australia’s laws prohibiting bribery of foreign officials; if in doubt, seek advice from Austrade or DFAT.
Setting up in Kazakhstan
Finding the right partner
Sustained business in Kazakhstan and the CIS requires commitment to a long-term market strategy.
A first step in this process is to determine the type of in-market representation best suited to your objectives. You should consider your needs at the time you enter the market while ensuring you have sufficient flexibility to adapt as the market develops over time.
Prior to formalising representation, it is prudent to ensure that the structure proposed is appropriate under local law and that you understand fully the implications of any agreements in the local context. You should ensure the agreement protects your interests to the fullest extent possible. Ultimately, as in any market, the durability and success of your representation arrangements will depend not only on your formal contractual undertakings, but also upon the strength of understanding, trust and communication that you develop with your in-market representatives and partners.
A golden rule is always to take your time in this selection process as it is generally the most important decision in ensuring that your business not only gets off to a good start, but continues to grow in the market.
In market representation
Kazakhstan is the world’s ninth largest country in geographic terms but the most businesses service two largest cities of the country – Astana (capital city) and Almaty (financial centre). The western oil city of Atyrau may be also attractive in terms of business developments and higher purchasing capacity. Not all companies attempt to service all of the country’s regions.
Banking and finance
Kazakhstan has a two-tier banking system. The National Bank of Kazakhstan is the country’s central bank and represents the upper (first) tier of the banking system of Kazakhstan. All other banks represent the lower (second) tier of the banking system, excluding the state-owned Kazakhstan Development Bank, which has a specific legal status.
Today there are some 39 banks in Kazakhstan, all of which are privately owned. The banking system in Kazakhstan had accumulated assets valued at more than US$77 billion as of 1 January 2011 – representing a four per cent increase from the previous year. Aggregate bank liabilities totalled US$79 billion. The top six banks control some 75 per cent of all Kazakhstan’s banking assets. Twenty nine foreign banks are represented in Kazakhstan. Some have established a presence by servicing large energy firms and international trading companies, while some are expanding into retail.
Banks in Kazakhstan have experienced a lengthy period of political stability and economic growth, although many are still struggling to recover from the effects of the global financial crisis, owing to the country’s immature financial laws. Most Kazakh banks borrowed excessively on foreign markets during the past decade, resulting in surplus liquidity and falling quality in domestic loan books. Banks are now are adopting a more conservative outlook and seeking to manage bad debts.
In 2006, the Kazakh government established the Regional Financial Center of Almaty (RFCA), a special legal regime aimed at the development of Kazakhstan’s financial sector. The law regulates interactions between participants in the financial centre and other interested parties.
Links and resources
Government, business and trade
Chamber of Commerce and Industry in Kazakhstan – www.ecocci.com/NDC/Generic/Content/MemberOrganizationDetails.aspx?ID=7
Customs Committee – www.keden.kz
European Business Association in Kazakhstan – www.eurobak.kz
Foreign Investors Council – www.fic.kz
Foreign Ministry of Kazakhstan – www.mfa.kz
International Business Council – www.ibckyrgyz.com
Invest in Kazakhstan – www.invest.gov.kz
JSC Investment Promotion Center ‘Kazinvest ‘ – www.kazinvest.kz
Kazenergy Association – www.kazenergy.com
Kazakhstan Petroleum Association – www.kpa.kz
Kaznex Invest – National Agency for Exports and Investment – www.kaznex.kz
Library of Laws and legislative acts of the Republic of Kazakhstan – www.zakon.kz
National Bank – www.nationalbank.kz
Official site of the Government – www.government.kz
Official site of the President of the Republic of Kazakhstan – www.akorda.kz
Site for foreigners in Kazakhstan – www.expat.nursat.kz
Statistics Agency of the Republic of Kazakhstan – www.stat.kz
News and media
The Times of Central Asia (English newspaper) – www.times.kg
Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.