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Foreign Investments, Basic Provisions.

Currently, the economic development of the Republic of Kazakhstan, among other things, is influenced by the infusion of foreign investments that come from both CIS countries and from far-abroad. For the development of any economy, investments are an integral part of the present-day economy.

 

Various academic and Law books provide various definitions of Investment. But despite the differences, the essence of the definition is the same:

1) Investments – investing capital in order to receive profit.

2) Investments - cash, securities, other property, including property rights, other rights with monetary value invested in business ventures and (or) other activities for the purpose of receiving profit and (or) achieving some other useful effect.

 

The Law of the Republic of Kazakhstan dated January 8, 2003 № 373-II “On Investments” provides an accurate definition of investment:“Investments are all types of property (other than goods intended for personal consumption), including financial leasing items from the date of a lease agreement, as well as rights thereto, invested by investor into the authorized capital of a legal entity or for an increase of fixed assets used for commercial activities, and fixed assets under the concession agreement produced and received by concessionaire (assignee)”.

 

Receipt/infusion of foreign investments in the economy of any country contributes to the accelerated development of enterprises, improves the quality of human capital, and creates new jobs. Receipt/infusion of foreign investments in the Republic of Kazakhstan is carried out through establishing joint ventures, subsidiaries, privatization of foreign-invested state enterprises, transfer of large industrial enterprises management to foreign companies, etc..

 

Currently, Kazakhstan has the necessary legal framework for investment activities. Thus, in 2003, the Law of the Republic of Kazakhstan “On Investments” was adopted which regulates the legal and economic basis for investment promotion.

The above Law guarantees full protection of investors’ rights and stability of contracts signed, and regulates the work of state authorities in respect of investors (free movement of capital, repatriation of capital, freedom of profits allocation, the right to private ownership of land, including for foreign companies).

Also, the Law determines the governmental measures to support the investments, taken in priority sectors of the economy of the Republic of Kazakhstan. Measures of the state support of investments equally apply to domestic and to foreign investors.

State investment support is to provide investment preferences.

The Law of the Republic of Kazakhstan “On Investments” specifies the types of investment preferences:

1. Investment Project (including priority investment project) provides for the following types of investment preferences are provided: - relief from customs duties; - government land grants.

2. Priority Investment Project provides for the following investment preferences: - tax preferences; - investment grants.

 

The above Law provides for legal protection guarantees for investors’ activities in the territory of the Republic of Kazakhstan.Under Article 4 of the Law “1. Investor is provided with full and unconditional protection of rights and interests, stipulated by the Constitution of the Republic of Kazakhstan, this Law and other laws and regulations of the Republic, as well as international treaties ratified by the Republic of Kazakhstan”.

2. Investor shall have the right to compensation for damage caused to him by the adopted public authorities’ acts that are inconsistent with the laws and regulations of the Republic of Kazakhstan, as well as a result of unlawful acts (omissions) of such authorities’ officials, in accordance with the civil legislation of the Republic of Kazakhstan.

3. Republic of Kazakhstan guarantees stability of contracts entered into between investors and state bodies of the Republic of Kazakhstan, except when amendments to such contracts are made ​​by agreement of the parties”.

 

The Law also sets forth guarantees of stability in the event of changes in the legislation of the Republic of Kazakhstan. Thus, legal entities implementing investment priority projects are guaranteed stability whenever there are changes in:

1) tax legislation of the Republic of Kazakhstan in accordance with the Code of the Republic of Kazakhstan “On Taxes and Other Obligatory Payments to the Budget” (Tax Code);

2) the legislation of the Republic of Kazakhstan on employment in the field of employment of foreign nationals.

 

Today, the global market place is constantly competing for large (global) investments, to which relevant government authorities respond immediately by working (taking actions) towards increasing the attractiveness of our country to foreign investment.

The government of the Republic of Kazakhstan works regularly to improve the economic climate to encourage foreign investments. Thus, at the time there was the “Program to attract investments, to develop special economic zones and to promote export in the Republic of Kazakhstan for 2010 - 2014 years” developed.

There also was an agreement signed between the Government of the Republic of Kazakhstan and the Organization for Economic Cooperation and Development on implementation of the project called “Participation of foreign direct investments in the development of small and medium-sized businesses”. The main purpose of this agreement is to promote regional development and diversification of the economy of the Republic of Kazakhstan, development and implementation of strategies to strengthen regional capacity of small and medium-sized businesses through the approach of using the potential of foreign direct investments at a regional level.

 

However, the Government of the Republic of Kazakhstan has passed a decree on May 28, 2014 № 570 “On approval of the integrated action plan to attract direct foreign and domestic investments”. This Decree contains five areas/activities to attract foreign investments, such as:

- Area 1: new package of incentives to attract direct foreign and domestic investments;

- Area 2: further development of SEZ (Special Economic Zones)

- Area 3: simplification of visa regime

- Area 4: improving the “investment ombudsman” institute

- Area 5: a concrete plan to attract foreign and domestic investments to the Republic of Kazakhstan for 2014 - 2015

Each of the ways to attract direct foreign investments includes a number of activities with persons assigned to each responsible for their implementation, and with a timetable set for their implementation. The form of completion of these activities is different from preparation of a draft law to the information of a responsible officer.

 

So, in order to improve the investment climate for domestic and foreign investors, the Government of the Republic of Kazakhstan holds various business forums and conferences to get acquainted with investment opportunities in Kazakhstan, to build a systematic work with foreign investors, and to develop special economic zones.

Based on the foregoing, Kazakhstan can be considered one of the promising countries for foreign investments. Foreign investments can yield positive results for everyone involved; the legal basis for this provides maximum opportunities.

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