January 1999

by Judith Robinson

Astana, a provincial town located 1,000 kilometers north of Kazakhstan's former capital, Almaty, became the new capital of Kazakhstan in December 1997. Remote, yet more centrally located inside the country than Almaty, and relatively free of seismic instability, Astana is positioned to link its Central European and Asian neighbors, notably Russia and China. The new location is also intended to blur potential ethnic divisions between the predominantly Russian north and the Kazakh south. The Government of Kazakhstan hopes that the move will attract fresh investment to economically depressed north central Kazakhstan.

Astana was formerly known as Akmola, but now renamed Astana, or "Capitol," in honor of its new status. The town covers about 20 square kilometers and is the administrative center of Akmola Oblast, a flat 121,400 square kilometer area with extremely harsh winters with driving wind and snow and burning hot summers. A lack of infrastructure makes doing business there difficult in the short run; however, the opening of a five-star Intercontinental Hotel in June 1998 signals the introduction of modern conveniences for business travelers to the city.

Transformation of Astana from a regional city to a capital carries an estimated cost of about US$6 billion, with 1998 expenditures at about US$500 million by the third quarter. There are major, obvious needs in construction, transportation, communications, and electrical power infrastructure. Municipal services, including improvements to water supplies and sewage systems, are under way. There is a rapidly evolving construction materials industry in the area, with capital housing construction a priority. Other priority projects include (1) development of modern facilities for power generation, distribution, and storage; (2) construction of road, rail, and air links between Almaty and Astana, and development of an attendant service network; (3) renovation of the Astana Airport and its modern air traffic control system; and (4) establishment of business centers and a public transportation system. Several major Kazakhstani banks are now operating branches in Astana, including Kazagroprombank, Kazkommertsbank, and Temirbank.

The economy of surrounding Akmola Oblast is mainly based on agriculture; the oblast is responsible for between 6 and 11 percent of Kazakhstan's poultry production, meat and meat processing, 20 percent of grain production, and about 36,000 tons of vegetables on 8.6 million hectares of agricultural land and 3.6 million hectares of arable land. Thus, opportunities exist for U.S. firms in food processing, especially for used and refurbished equipment, and agricultural equipment modernization. For example, one U.S-Kazakhstani joint venture, Aozt Yryz, produces meat products for the local market. Light industry, such as newspaper publishing, is another promising sector.

Astana has been designated a "Special Economic Zone" (SEZ). Foreign and domestic investors operating in Astana SEZ will enjoy investment privileges and guarantees under the Law on State Support of Direct Investments, including exemptions from customs duties, taxes, and tariffs. Goods produced or reprocessed in the SEZ, in accordance with the Law on Customs, are exempt from customs duties upon export from the SEZ. For investment in priority sectors in Astana, such as housing and public utilities construction, the Government of Kazakhstan grants tax exemptions from income, land, and property taxes for up to 10 years.

A good and efficient way for U.S. firms to make initial contacts in Astana is to utilize the Gold Key Service offered by the U.S. Commercial Service in Almaty, which provides market-oriented briefings, custom-tailored agendas with prescreened contacts, and logistics assistance. The Commercial Service at the U.S. Embassy can be contacted at tel: +7 (3272) 63-88-11 or fax: +7 (3272) 63-36-03.

For more information on Kazakhstan and the new capital, visit BISNIS OnLine at www.mac.doc.gov/bisnis/country/cntasia.htm#Kazakhstan.

Judith Robinson covers Kazakhstan for BISNIS in Washington, D.C.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)