The Business Year

Bolat B. Zhamishev


Clear Skies

Minister of Finance, Kazakhstan


After graduating with a PhD in economics, Bolat B. Zhamishev went on to hold the positions of Department Vice-Head and Vice-Chairman of the National Bank, Vice-Minister of Labor and Social Protection, Vice-Minister of Finance, Vice-Minister of Internal Affairs, and Chairman of the Agency for Supervision of Financial Markets and Institutions. Before being appointed Minister of Finance of Kazakhstan in November 2007, he served as Vice-Chairman of the Executive Board of the Eurasian Development Bank.

How is Kazakhstan unique in establishing a favorable tax climate vis-í -vis the other emerging economies in the CIS region? Tax rates in Kazakhstan are among the lowest in the world. […]

How is Kazakhstan unique in establishing a favorable tax climate vis-í -vis the other emerging economies in the CIS region?

Tax rates in Kazakhstan are among the lowest in the world. What differentiates Kazakhstan’s tax system from that of its neighboring countries is a generally low tax burden on the economy, which is achieved through low rates that form the state budget. Along with this, our tax system also includes a number of preferences aimed at creating a favorable investment climate. The corporate income rate has been reduced to 20%, and the term for the transfer of losses from business activities has been increased to 10 years. Payments for individuals, entrepreneurs, and small businesses have been reduced. Furthermore, the VAT rate is 12%—one of the lowest among the world’s standard tax rates. The code provides taxpayers with the possibility for investment tax preferences, which allows full deductions while calculating corporate income tax. In addition, the tax law provides special treatment for organizations operating in economic zones, which exempts them from paying corporate income tax, property tax, and land tax payments under certain conditions, as well as the application of a zero VAT rate on sales turnover in the zone. For taxpayers operating in the ICT sector, an additional exemption from social security tax is applied. Also exempt from taxation are dividends and capital gains for the relatively long-term ownership of stocks and shares, as well as the sources of income separate from subsoil use in Kazakhstan. In the World Bank’s Doing Business 2012 report, Kazakhstan ranked 13th in terms of taxation, well ahead of other countries in the CIS region and Eastern Europe. An assessment of the overall tax rate reveals that Kazakhstan boasts one of the lowest tax rates in the world, ranked 40th ahead of countries such as the UK, Norway, Russia, Germany, and the US.

How would you describe the main anchors of the new banking law and the improvements it will bring to the system?

Since 2008, Kazakhstan faced the consequences of the crisis in the global financial system, which required a quick and timely response from the government. Hence, the state supported second-tier banks in order to maintain liquidity and stability, as they are integral elements in the economic system and can ensure the normal functioning and development of the market. The state provided financial support to the banking sector to maintain lending to the real economy and its overall stability. These measures were taken in a timely and effective way. The global crisis provided an opportunity to identify the main causes of the instability of financial institutions vis-í -vis economic shocks. Lack of information transparency, low capitalization, a high concentration of business operations with high risk, poor corporate governance, and a weak degree of responsibility by the supervisory authorities are among the main causes of the instability. Therefore, in December 2011 we adopted a new law to minimize risks. The amendments are aimed at leveling the shortcomings and increasing the transparency of financial institutions. To strengthen the consolidated supervision of banking conglomerates by minimizing the risks of financial institutions from transactions with related parties, major changes were made. The important rules were the introduction of transparency schemes and the improvement of the quality of financial institutions. The crisis also led to the introduction of early response indicators for actors in the financial sector. At the same time, the responsibility of these actors increased, including improving corporate governance that ensures the accurate disclosure of financial accountability.

How would you assess the importance of the Eurasian Economic Community Anti-Crisis Fund? What is the scope of Kazakshtan’s involvement in the process?

The 2008 global economic crisis significantly affected the Eurasian economies and the conditions of their development. Much of our efforts are devoted to basic anti-crisis policies. In order to overcome the negative effects of the crisis on national economies, ensure economic and financial stability, and promote the further deepening of economic integration, the Eurasian Economic Community developed an anti-crisis fund. Since its inception, the fund has provided financial support to Tajikistan and Belarus. In terms of the scope of Kazakhstan’s involvement in the fund, the country is the second largest shareholder, with an initial contribution of $1 billion­— second after Russia. In turn, we believe that the fund should be used for investment projects aimed at deepening the integration process and to ensure sustainable economic development.

How will the creation of a development bank affiliated with the Shanghai Cooperation Organization (SCO) contribute to economic progress in the region?

Based on the current global economic risks, it is advisable to create a financial institution that will promote the efficient use of resources that can expand economic and trade relations as well as industrial and investment cooperation with the SCO. Regional cooperation through the establishment of international financial institutions such as the Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), World Bank, and the Inter-American Development Bank (IDB) are integral in achieving specific goals to maintain and develop the economies of the member states. The experience of international development institutions shows that such financial institutions play a specific role in times of financial crisis, using their privileges, immunities, and resistance to high risks to continue and even increase investments in priority sectors. During the SCO meeting of the Council of Heads of Government on November 7, 2011 in St. Petersburg, the Chinese side proposed the establishment of the Development Bank of the SCO, a body that will be providing financial services for medium- and long-term investments for public and private clients.

What are the highlights in terms of bond issuance in 2011?

Domestic government borrowing is set to finance the budget deficit and maintain sufficient government securities, with a vision to establish an appropriate reference point in the stock market. In 2011, the Ministry of Finance issued state valuable papers with maturities of one to 20 years, in the amount of approximately $4.5 billion. Today, despite the absence of sovereign Eurobonds, the domestic corporate sector is actively issuing corporate bonds. According to experts, the global market is now characterized by high volatility, which may adversely affect the value of a possible sukuk issuance. In general, given the lack of need for external borrowing, as well as the current situation, the Ministry of Finance has no plans to issue Eurobonds or sovereign sukuks in 2012. However, in the medium term, the Ministry considers these issuances as a possibility.



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