Diplomatic Pouch / September 30, 2010
By Larry Luxner
Kazakhstan, the world’s ninth-largest country in size, already belongs to the Commonwealth of Independent States. But what it really wants is membership in a far more important club: the World Trade Organization.
On Sep. 15, a top official of the former Soviet republic came to Washington to make a pitch for her country’s entry into the Geneva-based WTO.
Zhanar Aitzhanova, Kazakhstan’s minister of economic development and trade, spoke to some 45 business executives at the Ronald Reagan International Trade Center. She was introduced by William C. Veale, executive director of the U.S.-Kazakhstan Business Association (USKBA), and warmly welcomed by Andrew Gelfuso, who heads the ITC’s Office of Trade Promotion.
Aitzhanova said her vast Central Asian country first applied for WTO membership 15 years ago, though it didn’t begin active talks until 2004.
“We are now negotiating with the U.S. government on market taxes, import duties and other things,” said the official. “This time, we have achieved substantial progress in our bilateral negotiations by closing a large segment of our talks on goods market access. We have agreed on binding rates for import duties which Kazakhstan will be applying upon accession.”
Aitzhanova, who studied in Moscow and Vienna, also has master’s degree in public administration from Harvard’s Kennedy School of Government. She began her career with the United Nations Development Program, serving in Kazakhstan and Mongolia, and eventually became Kazakhstan’s chief multilateral trade negotiator.
Since March 2010, following a government reshuffling, she has headed the country’s newly established Ministry of Economic Development and Trade.
“We still have a few issues remaining in the services sector, including the conditions under which specialists and managers will be working in Kazakhstan. There is a request from the U.S. government and the European Union to allow direct branching rights for banks and insurance companies in Kazakhstan, and to undertake the liberalization of telecom services. By the end of this year, we’ll be able to achieve a consensus on Kazakhstan’s commitments and finalize a bilateral deal.”
Aitzhanova said her country has also come to an agreement with her American counterparts on veterinary certificates for U.S. commercial interests in the region.
“Veterinary certificates do matter a lot because of potential exports of meat, and ongoing exports of poultry,” she said. “We are now discussing intellectual property rights issues.”
Earlier this year, Kazakhstan — along with fellow ex-Soviet republics Russia and Belarus — launched a customs union as a first step toward forming a broader EU-type economic alliance of former Soviet states. Meeting July 6 in the Kazakh capital of Astana, the leaders of the three nations formed a single customs territory, meaning that with few exceptions, goods which have cleared customs in one of the three no longer have to go through any further clearance checks at the border.
“By joining this customs union, Kazakhstan’s internal market has increased its size from 16 million people to 168 million,” she said. “We believe this will have a positive impact on diversification of investments.”
That new common market boasts a $2 trillion economy with $900 billion in trade and 90 billion barrels of oil reserves; Kyrgyzstan and Tajikistan hope to join in as well.
Since independence in 1991, Kazakhstan has managed to attract $108 billion in foreign direct investment, 70 percent of which went to the oil and gas sector.
“One of the major tasks our government faces is how to diversify the economy and reduce its dependence on highly volatile commodities, as recent prices have shown,” said Aitzhanova.
“We produce a lot of raw food and we’re very much interested in processing and exporting this food. Formation of the customs union would open up more prospects for foreign investors interested in this sector,” she said, noting that Kazakhstan imposes a value-added tax of only 12 percent, compared to 18 percent in Russia and 20 percent in Belarus. “We also believe our low tax base, as well as the work we’re undertaking to simplify business procedures — by reducing the number of permits and licenses issued for opening new businesses — will facilitate investments.”
In 2009, two-way trade between the United States and Kazakhstan came to around $2 billion. Poultry accounts for 90 percent of U.S. exports to Kazakhstan by value; the remaining 10 percent consists of medical and agricultural equipment.
A look at the USKBA’s membership roster gives some idea of who’s investing in Kazakhstan: AES, Boeing, Case New Holland, Chevron, ConocoPhillips, ExxonMobil, Fedex, Fluor, General Electric, Halliburton and Shell Oil, to name a few.
“At this stage, only 2.8 percent of the total value of our foreign trade comes from the United States, but we believe that as a result of our accession negotiations, the U.S. role will increase,” said Aitzhanova. “The U.S. is already one of the largest foreign investors in Kazakhstan, with investments in oil and gas, financial services, construction and telecommunications.”
For more information, contact the USKBA at (202) 434-8791 or visit the organization’s website at http://www.uskba.net.