Current business situation
As a member of the Customs Union and Common Economic Space along with Belarus and the Russian Federation since 2010, Kazakhstan is part of an economic area of 170 million people. Under the union, there are no custom controls between the countries. The three countries adopted unified tariff and non-tariff import regulations from third countries and free movement of goods of the Customs Union within its territory. A common system of government standards and certification has also been implemented.
In May 2014, Russia, Kazakhstan and Belarus signed an agreement creating the Eurasian Economic Union (EEU) based on the same model as the European Union (EU). The EEU, officially launched on 1 January 2015, is a political and economic union. In addition to the common market for goods, services, capital and labor, the member states work out joint economic and regulatory policies and established the Supreme Eurasian Economic Council and the Eurasian Development Bank. Armenia joined on 2 January 2015 and Kyrgyzstan was added in August 2015.
Kazakhstan is a significant producer and exporter of hydrocarbons. The Kazakh Government is committed to diversifying the economy and reducing resource dependency. In 2015 the Kazakh Government launched the ‘100 Concrete Steps, a Modern State for All’ program, an institutional reform program that aims to modernise public administration, enforce the rule of law and state transparency, and foster economic diversification. It’s expected that production from the non-oil sector will double by 2025.
The Kazakh infrastructure sector faces severe challenges stemming from falling oil revenue, cuts to government expenditure and weak credit conditions. The government implemented two stimulus packages: the National Fund, a A$5.4 billion program aimed at supporting the SME sector, and another program worth A$3 billion that is targeted at infrastructure. The agriculture sector accounts for five per cent of Gross Domestic Product (GDP) but employs almost one-quarter of the working population.
Global economic trends such as the sluggish Eurozone, decelerating growth in China and a weak average oil price will be the big influencers in the next two to three years. China is now estimated to own half of Kazakhstan’s oil assets. Kazakhstan is predicted to become self-sufficient in oil production from around 2017 when the Kashagan oil field comes fully on stream.
The Kazakh Government is trying to increase the competitiveness of its state-owned enterprises (SOEs) and Samruk Kazyna, the state holding company, which manages US$100 billion of SOEs. The government is planning to spin-off certain assets and use funds to invest in new sectors. (Source CEEMEA Kazakhstan update).
Though Kazakhstan is Australia’s leading trading partner in Central Asia, the level of mutual trade remains modest. Most activities are associated with oil, gas and mining projects. Australia is increasing its share of the education market in Kazakhstan. The Australian education sector participates in the Kazakh Government’s ‘Bolashak’ International Scholarship Program.
Australia exports animals, beef, manufactured goods, vehicles and equipment to Kazakhstan and largely imports pig iron. Some trade is handled through intermediate markets such as Russia, China and the Netherlands.
Kazakhstan joined the World Trade Organization (WTO) and signed a cooperation agreement with the EU in 2015. Kazakhstan is considered the leader among the Commonwealth of Independent States (CIS) countries to provide the most favourable conditions for investment activities. The World Bank ranks Kazakhstan 41st out of 189 countries in the Ease of Doing Business 2015 report – up 9 positions from the previous year.
As with any international market, Kazakhstan has its own way of doing business and unique social norms. For Australian exporters, it’s important to take time to understand how business is done in Kazakhstan in order 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, nationalities and peoples, and exhibits 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 Soviet command system remain noticeable.
In Kazakhstan, strong personal relationships are critical to business success. At the first meeting, Kazakhs may seem not particularly open, but over time and especially in informal settings Kazakhs usually appear quite friendly. Both formal and informal face-to-face business meetings are vital to establish a rapport that can underpin successful business relationships.
Some points to consider to help you achieve successful businees outcomes are:
- 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 business people conduct 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 will be more accustomed to American or British accents. Minimise use of slang and provide clear, concrete explanations.
- Potential business partners are used to negotiating a 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 don’t have established formal procedures and don’t keep records of meetings, so a gentle reminder and timely follow up are essential.
- In some cases potential buyers may want to sign contracts on the same day as initial meetings. Be prepared that decisions can be made in a radically different manner – some decisions could take minutes while others may take months. The government system and quasi-government structures can be particularly slow while private business people are often faster to decide on deals. Don’t 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 discussions may be held in 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. You should be careful with your Kazakh partners as not all of them may keep to agreed deadlines and commitments. It’s 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 frequently be 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 Market
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.
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.
Kazakhstan is the world’s ninth largest country in geographic terms but most business is created in the two largest cities of the country – Astana (capital city) and Almaty (financial center). The western oil city of Atyrau may also be 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.
For a long time the national currency, the Tenge, was kept within the corridor of 145-155 per US dollar under the managed float policy. In February 2014, it was devaluated by 19 per cent to about 185. A freely floating exchange rate for local currency was introduced by the Kazakh Government in 2015 resulting in further Tenge depreciation against a backdrop of a fall in world crude prices. The current exchange rate is 330 Tenge per US dollar.
Links and resources
Government, business and trade
Customs Control Committee
European Business Association in Kazakhstan
Foreign Investors Council
Foreign Ministry of Kazakhstan
Invest in Kazakhstan
JSC Investment Promotion Center 'Kazinvest'
Kaznex Invest / National Agency for Exports and Investment
National Chamber of Entrepreneurs of Kazakhstan
Official site of the Government
Official site of the President of the Republic of Kazakhstan
Statistics Agency of the Republic of Kazakhstan
The Almaty Expat Site
News and media
Information and legal database
The Astana Times
The Times of Central Asia (English newspaper)
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. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.