Expertise
Why it is Problematic for Investors to Take the Long View
Saken Zhumashev, Managing Partner, KPMG Caucasus and Central Asia
Modern Kazakhstan is not merely a country abundant with natural resources and having the fastest growing economy. It is also the country where importance is being increasingly attached to investment climate. Amid global competition for capital, we see that Kazakhstan is striving to create a favourable environment for investors, whether they are multinationals or local businesses. The government investment policy pays off - we have witnessed a record flow of international direct investments to Kazakhstan, totalled US$ 28 billion in 2022, according to the RK Ministry of Economy.
However, despite a positive trend in the growing volume of investment, a number of institutional barriers that exist in Kazakhstan may hamper moves towards improving investment climate in the country.
KPMG is a global network of audit, tax and advisory firms. KPMG employs 219,000 people in 147 countries.
KPMG aims to turn professional knowledge into real economic benefits for the benefit of its clients, employees, and society as a whole.
KPMG has been operating in Kazakhstan since 1996 and has offices in Almaty and Astana. The total number of employees is more than 700 people.
First, investors’ concerns over the rule of law and protection of rights.
In May 2023, The Organisation for Economic Cooperation and Development (OECD) published the results of a survey, where investors were asked to identify the key issues they faced in Kazakhstan. More than 60% of respondents pointed out corruption and excessive red tape, and over 30% of the surveyed highlighted the lack of rule of law, slowdown in reforms and absence of relevant legislation.
Second, frequent changes made to the legislation, including the Tax Code.
Kazakhstan, in terms of the way it administers and collects taxes, ranked 64th out of 190 countries in the Doing Business ranking, given up previously, indicating that the tax system is relatively simple and transparent. However, existing dual interpretation of tax law and frequent changes in tax legislation causes uncertainty for investors and complicate planning for the long-term.
We made a research to have found that since 1991, more than 1,400 changes have been made to various laws and regulations, of which 300 related to taxation.
Third, the high level of government involvement in managing the country’s economy and government funding of real business.