Kazakhstan Market Entry

Kazakhstan Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

For the promotion of the offered goods in Kazakhstan, strong personal contacts and periodically reinforced expressions of attention are important. These contacts must have a very broad background, as key persons change important positions, but the contacts remain. You cannot build your business activities only on sending e-mails and links to websites. If the Kazakh businessman is not interested in the offer or contact, he does not respond. He behaves similarly if he does not understand the offer sent in the language. A good knowledge of Russian is necessary for communication with a partner, the use of other languages, both in writing and orally, definitely causes problems. Requested opinions or answers must often be tactfully urged.

According to cheeroutdoor.com, another important fact is that there are only a few wholesale and retail chains in Kazakhstan. The main reason is the population-geographic factor, i.e. the large area of ​​the country with a relatively small number of inhabitants and thus the associated transport costs. Another important factor is that for the majority of the population, buying basic food and daily goods in supermarkets is considered a luxury, as many things can be purchased at lower prices in local markets. In the supply of small shops and large markets, Turkish traders play an important role (territorial and linguistic proximity). Another factor is cheap Chinese goods (especially in the markets).

On July 1, 2010, the Russia-Belarus-Kazakhstan Customs Union became fully operational, which simplified mutual trade (the resulting unified customs area for entrepreneurs means that their goods move across the territory of the CU states without customs declaration and clearance), introduced a unified customs tariff and simplified the movement of foreign goods within the single customs area. As of July 1, 2011, as part of the construction of the Customs Union mechanism, customs controls at the border between Kazakhstan and Russia were removed. Since January 2015, the Eurasian Economic Union has been operating between the Customs Union states, Armenia and Kyrgyzstan. The Unified Customs Tariff, out of a total of 11,170 customs regulations, increased for 5,704 and decreased for 497, Kazakhstan negotiated an exception for 409 items – such as medicines, plastics, paper and cardboard, aluminum products, railway and tram locomotives. With the establishment of the CU, the average level of customs duties in Kazakhstan increased from 6.2% to 10.6%. Only in the course of 2019, as a result of the gradual reduction of customs duties after joining the WTO, did they fall to a value of around 7% again. However, products imported into the CC under these conditions may not be re-exported to other countries of the Eurasian Economic Union. That is national certificates and declarations (eg GOST and TR) after March 15, 2015 are no longer valid. After this date, only Union certificates/certificates and declarations of conformity will be used. However, it is not enough to just obtain new documents, the legislation of the Customs Union also requires changes to the labeling of goods. In order to import goods to Kazakhstan, it is necessary to submit a contract on the import of goods to the bank. The bank will register this contract. The contract registered in this way must be submitted to the relevant customs authorities for registration, where the legal or natural person is subsequently listed as a “participant in foreign business activity”. After importing the goods, the importer pays customs duty plus 0.1% of the contract price. After paying the mentioned fees, the importer pays 12% VAT (from 1/1/2009) on the amount consisting of the contract price and the customs clearance fees. If the importer is from a country with which the “Agreement for the Avoidance of Double Taxation” (signed with the Czech Republic in April 1998) is valid and has a document stating that he has already paid VAT in the country of origin, then the VAT payment is does not require or only that part of VAT is required by which the Kazakh VAT (12%) is higher than the VAT of the country from which the goods are imported. There are types of goods for which it is possible to request a deferral of VAT payment, e.g. medicines.

Fairly standard export control conditions are in place in Kazakhstan, based on the issuance of export licenses for controlled items. These are mainly some raw materials, foodstuffs, medicines, alcohol and, of course, weapons, military equipment and dual-use goods. The actual conditions for imports into Kazakhstan were relatively liberal, and market protection was rather applied through the refusal to provide funds from the state budget to finance goods and services that Kazakhstan does not urgently need. After the establishment of the Customs Union, matters regarding customs rates and partly also non-tariff barriers to trade fall under the competence of the CU. In connection with Kazakhstan’s entry into the WTO in 2015, some of the former protectionist measures are softening.

Forms and conditions of operation on the market

Since July 2013, the rules for the registration of legal entities, small business entities in Kazakhstan have changed. The procedure is fully electronic via the egov.kz portal. When registering a legal entity in a new way, it is necessary for the founder or founders to be registered before submitting a proposal to establish a new legal entity in the egov.kz system.

In Kazakhstan, there are many legal norms and regulations governing the issues of establishing a branch of a company in a place. When setting up an office or representative office, it is necessary to have a certified extract from the commercial register available, a court-certified translation of the statute is required. The same applies to the establishment of a joint venture. At present, a certified translation of these documents into Russian is sufficient, but in the future, it should be expected that a translation into Kazakh will also be necessary. For the establishment of an office, representation or joint venture, it is recommended to use one of the specialized consulting companies.

According to the information of Czech sales representatives, it is not possible to clearly state whether it is more expedient for companies to employ a Czech or a local citizen as a representative. The disadvantage of local forces is often the lack of loyalty to the represented company and the constant search for another, foreign company that would offer a higher salary. On the contrary, the advantage is that the salary is lower than that of a seconded representative of a Czech company. The advantage of a Czech representative is the connection with the Czech (broadcasting) company and a more objective assessment of the market. It turns out that the best combination is a situation where the head of the representation is a Czech citizen and the secretary or assistant is a local force. This combination has yet another advantage, because more and more people are starting to promote Kazakh in offices and companies, and this should be controlled by the local force. When delivering technological units, it is necessary to prepare for

Marketing and communication

Effective advertising and promotion in Kazakhstan is the participation of Czech companies in specialized international exhibitions and fairs, which have reached a relatively high level in recent years and are perceived as an important indicator of interest in the local market. However, it is desirable to accept local customs, which means especially communication with potential local customers in Russian, we recommend preparing catalogs and other promotional materials in Russian as well. The experience of recent years shows that the success of presentations at exhibitions in Kazakhstan is significantly greater than, for example, in Europe or the USA. There are basically two reasons. The first is that there is an oriental way of practicing business, starting with personal contact with a partner through the social side of business, which has its irreplaceable role in Kazakhstan. The second reason is that that many companies do not present their activities very well (for tax reasons, fear of competition, connections with high government circles, etc.), therefore even quite significant and powerful companies are not mentioned in information materials and catalogs. Participation in the exhibition gives them the opportunity to address their partner directly on the spot without unnecessary noise and “broadcasting unnecessary” information to the world.

A good opportunity to promote Czech goods and services is the participation of companies in exhibitions or fairs as part of the so-called official participation of the Czech Republic (events under the auspices of the Ministry of the Interior of the Czech Republic and some other ministries – MMR, MoZ, when participating companies are provided with a contribution to the exhibition area, etc.). An overview of these promotional events for the relevant year is published on the websites of the relevant ministries. The PaulTrade agency also implements joint participation in exhibitions with state support at selected exhibitions (fairs), not classified as official participation.

The costs of advertising in Kazakhstan’s mass media are relatively high, so Czech companies do not use this method of promotion very much.

Issues of intellectual property protection

Although Kazakhstan has relatively high-quality legislation for the protection of intellectual property rights, counterfeit branded goods are entering its market. Goods of this origin are usually sold in markets.

The situation is better in the area of ​​protection of industrial rights directly on the territory of Kazakhstan. In case of registration of counterfeit goods from the Czech Republic, we recommend informing the embassy in Nur-Sultan or the PaulTrade office in Almaty.

Public procurement market

The Public Procurement Act was adopted in 2002 and defines a transparent procedure for awarding public contracts. Public contracts are published in Kazakhstan on the GosZakup website.

The public procurement website ensures the registration of participants in the public procurement process, the collection of information on completed public procurements, the implementation of electronic public procurements, the provision of information on planned public procurements, and the publication of statistical data.

Participants in electronic government procurement need electronic certificates and register as a participant on the public procurement website. With the help of the certificate, the participant can enter the system and participate in the electronic auction of the public contract.

Payment terms, payment ethics and resolution of commercial disputes

In 2019, Kazakhstan was reassigned to category 5 (out of 7) of the breakdown of countries by risk according to the OECD consensus.

In Kazakhstan, the usual payment conditions include 100% payment in advance, with good, long-term and proven business partners, this amount is reduced to 50%. In general, it can be stated that payment morale is lower among traders, both for individuals and legal entities. The exception is once again good business partners, when each party is aware of the danger of damaging their relations with the partner. However, even in this case, the Kazakh side considers the postponement of some payments as a completely normal matter, and it should be explained to them that between solid partners, everything is paid on time. It is a common practice in the country that after the amount required for payment is set aside, this amount is sent to its addressee only after many emergencies, because the sender tries to use it, at least for a short time, to do business in the banking sphere.

In the case of the participation of the Czech banking sector in the financing of some projects, it is desirable to convince the Kazakh side of the priority of these projects in such a way as to provide a guarantee acceptable to EGAP. With regard to the improvement of the financial situation in Kazakhstan and the increased quality of banking, other payment instruments (especially letters of credit) of the largest Kazakh banks are accepted in the Czech Republic.

There are already quality law firms in Kazakhstan that can be helpful in a commercial dispute. The fact that you need legal representation in a dispute is due to the lower level of enforceability of the law. The government is trying to gradually improve the investment climate, especially for larger foreign investors

Visas, fees, specific conditions for traveling to the territory

In order to enter and stay in the territory of a foreign country, citizens of the Czech Republic must meet the conditions set by its laws. The embassy of the given country is responsible for communicating the current conditions of entry and stay in the territory of a foreign country. The following information is intended for basic orientation. The Ministry of Foreign Affairs of the Czech Republic therefore recommends that Czech citizens check with the embassy of the country they are visiting before traveling whether the conditions for entry and stay have not changed.

The visa requirement for entering Kazakhstan on a travel and service passport was abolished by the Republic of Kazakhstan from 1 January 2022. For the time being, the obligation to submit a PCR test not older than 72 hours still applies for entry. Kazakhstan also recognizes a valid vaccination certificate issued by the Czech Republic. Children under the age of 5 traveling with an adult do not need to submit a PCR test.

In the case of certain types of stays and visas – linked, for example, to employment – ​​an entry visa must be obtained. It is possible to apply for a visa at the Embassy of the Republic of Kazakhstan in Prague: Pod Hradbami 662/9, 160 00 Prague 6 tel.: 233 375642 (ambassador’s secretariat), 233 375 643 (consular department), fax: 233 371019 e-mail: [email protected] gmail.com (embassy).

With regard to travel restrictions and quarantine measures related to the coronavirus pandemic in the world, we recommend following the website of the Ministry of Foreign Affairs of the Czech Republic in the section Rozcestník (Kazakhstan).

Information on the conditions of travel and stay in the place

Considering the vastness of the territory, it is recommended to travel by air for longer distances (between regional centers). Domestic air transport is relatively developed. An alternative is a train/bus/car, which takes considerably more time, e.g. between the capital Nur-Sultan and Almaty 12 to 18 hours. In cities, it is best to use taxi services, mobile applications such as Yandex taxi are suitable. Public transport runs regularly in larger cities.

Accommodation services in Kazakhstan are at a comparable level as in Europe, hotels from 3* above provide relatively high-quality facilities. The national currency Tenge (KZT) is widely used, in exceptional cases it is possible to pay in USD or EUR (hotels). In larger cities, you can pay by card practically everywhere. Payments via the Kaspi mobile application are popular.

Tap water is drinkable, but bottled water is recommended for travelers. Bigger cities are safe in the center. It is forbidden to drink alcohol in public places and other violations of local rules.

Employment of citizens from the Czech Republic

For the employment of foreigners, Kazakhstan applies a regime where the government sets annual quotas for the employment of foreigners, which it distributes to regional akimats and the capital Nur-Sultan and the city of Almaty. The government pursues a policy of maintaining the employment of the domestic workforce, and by reducing the quotas for foreigners, it wants to achieve that vacant jobs are filled by domestic employees. In addition, for newly created positions, it is required to ensure the share of employees from KZ, which in some cases reaches up to 90%.

The quotas are distributed among the regions, the cities of Nur-Sultan and Almaty, among other things, taking into account the situation on the labor market. In general, it can be stated that obtaining a work permit is generally not easy. The situation is simpler for experts who come to Kazakhstan to implement an investment project (within foreign direct investment). The permit for temporary residence, obtaining a birth number and other documents is provided by the Center of Public Services. Detailed information regarding the employment of foreigners can be found here.

For the year 2022, a minimum wage of approx. 3,000 CZK (approx. 60,000 tenge) was approved.

As for health care, if it is an acute provision of first aid, it is provided free of charge. Only aftercare is paid. The prices are high, even considering the quality of the treatment provided. In view of the above, it is recommended to take out insurance when traveling to Kazakhstan. If a truly critical situation arises, it is advisable to declare that you are interested in the provision of paid health care, thus a significantly higher standard of treatment or hospitalization can be achieved. It is therefore necessary to have sufficient cash with you, as this way you can eliminate some unpleasant situations.

Fairs and events

Kazakhstan hosts several major industry fairs and exhibitions every year, such as AgriTek agricultural fair in Nur-Sultan (March), KIHE health fair in Almaty (May), Mining Week mining technology fair in Karaganda (June), Kazbuild fair in Almaty ( September), Power Kazakhstan electricity fair in Almaty (October), WorldFood food fair in Almaty (November), etc.

Complete overview of all exhibitions and fairs held in Kazakhstan, incl. detailed information about the date of the event, its objective, conditions for organizing the event and contacts can be found on the websites of individual Kazakh exhibition companies or exhibition organizers:

  • ITECA (Almaty, Nur-Sultan, Atyrau) tel.: +7 727 258 34 34, Fax +7 727 2583444 e-mail: [email protected], web: www.iteca.kz, www.caspianworld.com
  • Atakent-Expo tel.: +7 727 2582535, 751357, 747926, Fax +7 727 2582959 e-mail: [email protected], website: http://eng.atakenexpo.kz /
  • TNT Productions, Inc. tel.: +7 727 2501999, Fax +7 727 2505511 e-mail: [email protected], web: www.tntexpo.kz, www.tntexpo.com
  • “CATEXPO” phone: +7 7272 663680/81/82/83, Fax +7 727 2663684, e-mail: [email protected], website: www.catexpo.kz
  • KazExpoService phone: +7 727 2921966, 920840, Fax: +7 727 2924838 e-mail: [email protected]
  • Kazexpo phone: +7 727 2729531, Fax: +7 727 2507519 e-mail: [email protected], web: www.kazexpo.kz
  • KORME Exhibition Center phone/fax: +7 (7172) 52-43-43/11/12/13/14 e-mail: [email protected], website: www.korme-expo.kz.

More detailed information on participation in exhibitions and fairs in Kazakhstan (with state contribution) is published at www.businessinfo.cz, www.PaulTrade.cz and www.mpo.cz.

The Embassy of the Czech Republic in Nur-Sultan organizes a number of different activities, in addition to supporting participation in trade fairs, it deals with the organization of forums, business missions, as well as, for example, presenting specific companies at meetings in the regions of the country. One of the most effective tools is the organization of incoming missions of KZ entrepreneurs to the Czech Republic as part of the PROPED program.

Kazakhstan Market Entry