China-Kazakhstan Investment and Finance

Cooperation

Investment Opportunities in Kazakhstan

National Export & Investment Agency “KAZNEX INVEST”

Ministry of Investment and Development

March 2016

I. China’s FDI to Kazakhstan

II. Banking System of Kazakhstan

III. Chinese Banks in Kazakhstan

IV. China – Kazakhstan interstate cooperation

V. Silk Road Fund

VI. Current Trends:

A. Eurasian Economic Union

B. Exchange rate fluctuations

C. Investments Incentives

D. Special Economic Zones

VII. Investment opportunities:

A. Agriculture

B. Mining

VIII. Privatization

Table of contents

I. China’s FDI to Kazakhstan

-500.0

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

China FDIs to Kazakhstan (in million

USD)

Netherlands29%

USA17%

Switzerland 10%

China 8%

Russia7%

Other29%

Top 5 FDI to Kazakhstan by

country 2014

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

2011

2012

2013

2014

9 месяцев 2015

Top FDI industries in

2014 (in million USD)

Mining, oil and gas Services Processing

Trade Transport and logistics Other industries

Chinese Corporations in Kazakhstan

II. Banking System of Kazakhstan

Total assets of 38 second tier banks makes up 25 billion USD as of

01.01.2016.

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

Bank RBK

Eurasian Bank

ForteBank

ATFBank

Kaspi Bank

Bank CenterCredit

Sberbank

Kazakhstan Development Bank

Tsesna Bank

Halyk Bank

Kazkommerts Bank

10 biggest banks of Kazakhstan (2015-2016) in millions

2015 2014

III. Presence of Chinese Banks in Kazakhstan

Bank of China and ICBC both started its operations in Kazakhstan in 1993.

Banks are located in Almaty. Do not have subsidiaries in other parts of the

country. As of 1 January 2016 banks are ranked 22nd and 26th

correspondently by the size of assets.

General credit line accommodation agreement (5 billion USD, 15 years)

between JSC Development Bank of Kazakhstan and Export Import Bank

of China was signed in 2009.

General credit line accommodation agreement (500 million USD) between JSC

Development Bank of Kazakhstan and Export Import Bank of China is active

since 2009.

Under the agreement between The National Development and Reform

Commission of the People's Republic of China (NDRC) and Minister for

Investments and Development of the Republic of Kazakhstan currently

following projects are in the pipeline of “52 active projects”

IV. China – Kazakhstan interstate cooperation

Industry Number of projects

Total investments

(million USD) Chinese financing

Agriculture and Food

processing 6 2 855

(EximBank; СDB; Bank of China)

- 4

Mining 13 7 372

(SinoSure; Bank of China; CDB;

EximBank) - 6

IT 4 2 116 (CDB) - 1

Infrastructure and

Logistics 1 200

Space industry 8 364

(Sinosure; Bank of China; CDB;

EximBank) - 4

Petrochemistry 2 75

Construction materials 2 444 (EximBank) - 1

Chemical industry 9 10 291 (CDB; EximBank) - 2

Energy 7 1 381 (CDB; EximBank) - 4

52 25 098 22

Under the agreement between The National Development and Reform

Commission of the People's Republic of China (NDRC) and Minister for

Investments and Development of the Republic of Kazakhstan currently

following projects are in the pipeline of “20 potential projects”

IV. China – Kazakhstan interstate cooperation

Industry

Number of

projects

Total amount of

Investments

(million USD)

Agriculture and Food

processing 2 35

Mining 2 1 400

IT 2 614

Infrastructure and Logistics 2 4 171

Space industry 1 200

Petrochemistry 3 2 608

Construction materials 1 100

Chemical industry 2 2 443

Energy 5 255

20 11 826

V. Silk Road Fund

Silk Road Fund Kazakhstan2 billion USD charter capital

Silk Road Fund 40 billion USD charter capital

Investment Facility Loan Facility

Equity participation in single project cannot exceed 20% of Fund’s total equity

The ratio of debt to equity of the project should not exceed 80:20

The Chinese project content, including but not limited to: engineering, equipment, product sales,

export of technology and the provision of services by Chinese companies must be at least 30%.

Equity participation in one project - no more than

70% of the total equity of the Fund

Loan Financing is channeled through Kazakhstan

Development Bank;

Estimated value of the internal rate of return

(IRR) - not less than 10%.

Interest rate: in correspondence with interest rates

of Chinese state banks

VI. Current trends

A) Eurasian Economic Union

On august 20 the free float exchange rate system was adopted in Kazakhstan.

The next day 35,5% depreciation occurred. The exchange rate peaked at

380,3 tenge per dollar on 27th of January (101,9% depreciation since the

system change).

VI. Current trends

B) Exchange Rate Fluctuations

0

100

200

300

400

500

600

20

13

/1/1

20

13

/3/1

20

13

/5/1

20

13

/7/1

20

13

/9/1

20

13

/11

/1

20

14

/1/1

20

14

/3/1

20

14

/5/1

20

14

/7/1

20

14

/9/1

20

14

/11

/1

20

15

/1/1

20

15

/3/1

20

15

/5/1

20

15

/7/1

20

15

/9/1

20

15

/11

/1

20

16

/1/1

20

16

/3/1

Exchange rate fluctuations 01.01.2013 -

01.04.2016

KZT / USD KZT / EUR

KZT / 10 RMB KZT / 100 RUB

EXEMPTION FROM CUSTOMS DUTIES1) When transporting manufacturing equipment and spare parts for it the

exemption from customs taxation is granted for the term of investment contract but

not later than 5 years after the investment contract registration.

2) When importing components for the manufacturing equipment, raw stock and

(or) materials for term up to 5 years the exemption from customs taxation is granted

to the legal companies depending on the volume of investment in the fixed assets.

IN-KIND GRANTSIn-kind grants of not more than 30% of the total investment in fixed assets.

Free land

FREE ENTRY FREE WORK PERMITS

Visa-free entrance for citizens of Australia, Hungary, Italy, Monaco, Belgium, Spain,

the Netherlands, Norway, Sweden, Malaysia, the United Arab Emirates, Singapore,

the United Kingdom, the United States of America, Germany, Finland, France,

Switzerland, and Japan for the period from 16 July 2015 till 31 December 2017 if

the stay does not exceed 15 days (general application).

Foreign labor

Without permit

for the duration of construction + 1 year after commissioning of the investment

project for those with investment contracts

In 2017, Kazakhstan plans to abolish visa requirements for citizens of

the 34 member states of the OECD,

CASHBACK ON INVESTMENTS*

Reimbursement up to 30 %of the actual expenses for installation and construction works and equipment

acquisition without value added tax and excises on the basis of supporting

documents, but not exceeding the cost of expenses provided by preproject

documentation having the conclusion of state expertise.Stability of tax legislation for all taxes except VAT and excise (subject to investment

contract)

STABLE LEGISLATION*

STRONG PROTECTION OF INVESTOR’S RIGHTS*

Ombudsman’s Office

For ensuring protection of the rights and legitimate interests of the investors, the

investment ombudsman:

1) considers addresses of investors on issues arising during the implementation of

investment activity and gives recommendations for their solution, including

interacting with government bodies;

2) assists to investors in solution of arising issues in extrajudicial and pre-judicial

procedures.

Corporate income

tax (10 years)

TAX EXEMPTIONS:*

Land tax (10 years)

Property tax (8 years)

0 %

*Criteria for priority investment projects:

- provided to a newly established legal entity (the state registration of such legal entity has been completed not earlier than 24 months before filing an

application for the investment preferences), implementing a project matching the List of Priority Activities (approved by the Government);

– investments not less than two-million-fold rate of MCI (MCI – monthly calculated index, approved by the Law on the national budget).

NEW INCENTIVES (since 2014)Visa-free entrance

VI. Current trends

C) Investment Incentives

*Criteria for investment projects:

- provided to a legal entity of Kazakhstan, implementing a project matching the List of Priority Activities (approved by the Government).

VI. Current trends

D) Special Economic Zones

«Pavlodar»SEZ

Petrochemical industry

«NIPT»SEZ

Petrochemical

industry

SEZ «Saryarka»

Metallurgy

«Seaport Aktau» SEZ

Mixed

«Burabai» SEZ

Tourism

«Ontystik» SEZ

Textile industry

«Astana

- new city» SEZ

Mixed

«Chemical

Park Taraz»SEZ

Chemical industry

«Khorgos – Eastern

Gate»SEZ

Logistics

«Park of Innovative

Technologies»SEZ

IT - Innovations

Social Tax (for 5 years)

• Free plot of land for the entire period of existence of a SEZ

• Simplified procedure for employment of foreign labor

NON-FISCAL INCENTIVES

FISCAL INCENTIVES

INVESTMENT INCENTIVES IN SEZs

VI. Current trends

D) Special Economic Zones

Corporate income tax

Land tax

Property tax0 %

Exemption from VAT (for products consumed in SEZ)

EXEMPTION FROM CUSTOMS DUTIES

Exemption from customs duties for goods imported into the SEZ territory and exported* from the

SEZ territory to the rest of the customs territory of the Customs Union (CU).

*CU commodities produced (processed) by SEZ residents registered before January 1, 2012 with the use of imported

components, but recognized as EAEU products, are not subject to customs duties until January 1, 2017

Kazakhstan is a major producer of agriculture products and has significant

reserves for increase of production.

Investment opportunities in agricultural sector are following:

• Investments in existing companies wheat grain producers

• Investments in new meat producers (beef and lamb)

• Investments in production of potable oils (sunflower and others)

• Investments in fruits and vegetables production

• Investments in agriculture on irrigated lands

VII. Investment Opportunities

A) in Agriculture

From 105 elements of chemical table in the area of Kazakhstan identified 99,

explored up to 70, involved in the production of more than 60 elements.

Currently known more than 500 fields containing 1225 types of mineral raw

materials.

Kazakhstan has the world's largest known reserves of zinc, tungsten and barium

sulphate,

Kazakhstan has the world's largest known reserves of zinc, tungsten and barium

sulphate,

The second is a silver, lead and chromite,

The third is copper and fluorite

The fourth in molybdenum, and

The sixth is gold.

In terms of mineral reserves of Kazakhstan occupies the first place among Former

Soviet Union countries for chromite ores and lead, second is on oil, silver, copper,

manganese, zinc, nickel and phosphorus, the third is by gas, coal, gold and tin.

VII. Investment Opportunities

B) in Mining Industry

Currently in Kazakhstan, we can mention following promising investment

projects in mining sector connected to following areas :

Gold or gold ores

Copper

Iron ore production with high grade concentrate as a final product

Production of ferro-vanadium concentrate and production of the titanium

dioxide (raw material for basic paintings)

Lead and zinc concentrate

Vanadium concentrate (raw material for redox-vanadium accumulators)

Molybden-berillium and rare earth concentrates

Tantalum, niobium and rare earth elements

VII. Investment Opportunities

B) in Mining Industry

VIII. Privatization

Energy & Infrastructure Privatization of

refineries

Privatization through IPO

Invest in Kazakhstan