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  • WEDF 
  • Discussion Brief for the Export Strategy-Maker

    Problems and prospects of export development for the Republic of Kazakhstan

    This year Kazakhstan celebrates a decade of independence. For ten years our state has managed to maintain a stable economy, progress in its macroeconomic indexes, a favourable investment climate and relatively developed market infrastructure.

    1. Reforms in foreign trade policy over the Republic of Kazakhstan’s ten years of independence

    Let us briefly review foreign trade policy from the beginning of state independence (1991) till the present. 

    1991-1994 

    At the beginning of the 1990s the government set both internal and external prices for commodities assigned for export and set export taxes and charges. The national economy scored low in competitivity. The import of a great amount of consumer goods displaced domestic production. High inflation resulted in depreciation of incomes and assets of enterprises. The absence of a statutory and institutional base for foreign trade activities induced the government to intensify activity in this direction. 

    1995-1998 

    The liberalization of foreign trade continued. Government no longer allocated export quotas. The list of controlled commodities was reduced. The average rate of customs duty was cut from 4.9% to 4.2%. Authorities abolished the requirement to surrender 50% of export proceeds and did away with customs and fiscal privileges. The transition also covered the international commodity nomenclature for foreign trade. The registration of export contracts, except for state enterprises, was abolished. Procedures for ordering exports became simpler. All companies and individuals (except for state enterprises) were given the right to export goods without mandatory submission of details of the deal. Control of export and import goods in Kazakhstan to ensure their agreement with international standards and ruleswere made simpler. The republic approved a list of commodities subject to mandatory certification to meet standards of safety, health, property protection and safeguarding the environment. The new customs code was adopted. 

    All this had a major influence on exports and imports. In 1995-1999 these grew annually (except 1998), but the excess of imports over exports reached 4-5%. (13% in 1998) and the trade deficit increased from US$ 185 million in 1997 to US$ 750 million in 1998. 

    1999-2001 

    Today there are practically no obstacles to goods and capital. Kazakhstan has become a country with a market economy (recognized by the European Union in October 2000), enabling the removal of barriers to the sale of its goods to US and European.

    Protection from unfair competition for Kazakhstan’s producers is conducted according to measures common in global practice. It is negotiating entry into the World Trade Organization. Legislation gives a number of privileges to foreign investment in priority sectors.

    In 2000, on the basis of the Customs Union between Belorussia, Kazakhstan, Kyrgyzstan, Russia and Tadjikistan, the Euroasian Economic Community was founded. Trade and economic co-operation takes place duty-free with unified standards for goods, a harmonized foreign trade policy, and in accordance with the principle that indirect taxes are imposed by the exporting country.

    The main objectives of the Community for foreign trade policy are: 

    • Realization of a coordinated modification of the structure of member-countries’ economic
    • Assistance in export development
    • Creation of joint export-directed production
    • Realization of a coordinated policy on protecting the economic interests of exporters to other markets
    • Removal of barriers hindering mutual trade

    2. Kazakhstan’s export results

    Let us briefly review Kazakhstani exports for the first half of 2001.

    The total was US$ 8 billion, an increase of 19% over the same period of 2000. The trade surplus was a about US$700 million.

    Countries outside the CIS account for 59% of Kazakhstan’s trade, 69% of its exports and 44% of its imports. The trade balance with countries outside the CIS is positive but negative with the CIS. The traditional markets for Kazakhstani exports are Russia, Italy, Germany, China and Switzerland.

    Trade with the CIS states has continued to grow but import growth exceeded the rate of increase in exports with regard to this countries (142.1% as against 116%).

    The major Kazakhstani exports remain fuel and energy supplies, coal and non-ferrous metals. In the period under consideration the greatest growth in export related to meat and met products (8.4-fold), natural gas and titanium (2.4-fold), coal (150%), refined oil products (35 %), phosphorus and cotton fibres (each up 30%).

    Thus, Kazakhstan, as an exporter predominantly of raw materials, is subject to world business developments. The slowing pace of international economic growth has led to a reduction in external demand, and a decrease in demand for Kazakhstani exports on the part of a number of countries.

    3. Priorities in export policy

    Kazakhstan’s current export profile requires a state policy which simultaneously seeks to improve the competitivity of its basic export goods and to develop non-conventional, new goods for export requiring a high level of processing.

    As the export plays an essential role in economic growth of Kazakhstan, relations with interntional organizations are managed personally by the President.

    The state is very active in building maintenance and increasing transport corridors for exports.

    The tenge’s devaluation, resulting from the introduction of a free-floating exchange rate, spurred a resuscitation of production and an increase in price competitivity for domestic goods. Currency policy now aims to preserve an equilibrium in the balance of payments.

    The basic priorities of the state in problems of export policy are:

    Contributing to steady growth of export by:

    - Extension of commodity markets

    - Concluding bilateral and multilateral agreements on trade

    - Removal of present discriminatory barriers against Kazakhstan goods by negotiation

    - Increases in delivery of traditional Kazakhstan export goods

    - Development of external market for new non-traditional goods.

    Maintaining maximum returns from exports to be used for export policy by:

    - Treaties against double taxation

    - Ending the system of controlling foreign trade contracts aimed at reducing the taxable basis

    - Sanctions against exporters who abuse international practice and local laws.

    Bringing export controls in line with international practice by:

    - Banning ways of putting ungrounded limits on the export process for Kazakhstan goods

    - Ensuring that reforms of the economy in industrial, agricultural, transport and other sectors are strictly implemented.

    These priorities will be realized through:

    а) The expansion of credit and export insurance, information and reviews of new markets, and strengthening of the statutory base for meeting the conditions of world trade

    b) Export policy measures to reduce the risks from commodity market volatility

    c) Creation of an export development programme

    d) Establishing the legal basis for the development of electronic commerce

    е) Use of tools such as credits and incentives to persuade domestic exporters of raw materials to switch to goods with high added-value

    f) Defining the terms for an organization devoted to trade development (OCDT). One of its main activities will be the organization of a system of credits and export guarantees.

    4. Conclusion

    In conditions of harsher world competition with regard to goods and services, states must adopt a trade development policy grounded in a knowledge of the advantages and needs both of their own economy and of their trading partners.

    We hope for assistance from the International Trade Centre in the development of an information infrastructure for Kazakhstan exporters. We well be glad to receive proposals from participants on creation of joint projects.

    During the Forum we, as the representatives of the Republic of Kazakhstan, will be interested in following problems:

    • What new models exist in practice offering effective policies for development of exports?
    • What should be the role of the state?
    • How to diversify exports?
    • How far it is possible to create the global information system on export possibilities?
    • What are international economic and financial organizations doing to answer the concerns of developing country exporters?
    • How do far participants share the view that developed countries should not use trade restrictions against developing countries (quotas, double licensing, protective measures, etc) to solve their political problems?

    We hope that the Forum will provide answers not only to these questions on export development strategy, but also enable us to make new acquaintances and strengthen business cooperation.

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    Posted 18 August 2010 
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