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Tokyo Business Forum Highlights Japanese Interest In Caspian Region Giant, Kazakhstan

By Aygul Ospanova November 6, 2017

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Kazakhstan's President Nursultan Nazarbayev while visiting Japanese Tokyo Rope Manufacturing Co., Ltd. in 2016. / Ak Orda

Kazakhstan is ripe for receiving more foreign investment into its economy of $128 billion, Central Asia’s largest, as Japanese companies expressed interest in developing deeper commercial ties during the Kazakhstan-Japan Business Forum, titled “Regions of Kazakhstan: Potential for Japanese Investments,” held in Tokyo on October 31.

“Japan is one of the most technologically advanced nations in the world. And Kazakhstan is interested in cooperation with Japanese companies, attracting the latest technologies and investments in its economy,” said Zhandos Nurlanov, Deputy Chairman of the Board of Kazakh Invest, while addressing the attendees.

Japan’s direct investments in Kazakhstan over the past ten years amounted to around $5.5 billion, making it one of the country’s largest investors, according to Yerlan Khairov, Kazakhstan’s Vice Minister for Investments and Development, who spoke at the event. Tokyo’s investments in Kazakhstan involve more than 60 different enterprises engaged in industries ranging from the oil and gas sectors, to metallurgy, finance, mining, telecommunications and logistics. Representatives from 150 Japanese companies specializing in aviation, electronics, chemical industries, real estate, cargo and shipping, and healthcare participated in the event.

Kazakhstan’s potential in metallurgical industries was a highlight of last week’s gathering. On November 2, Japanese entrepreneurs were acquainted with geological exploration projects that are centered on rare earth elements, which are required to power 21st century technologies, from tablets to smartphones. Kazakhstan is rich in these much-needed metals, and Japan has been cornering its market for over two years. In 2015, JOGMEC and KazGeology Company agreed to launch explorations of deposits of rare-earth elements, particularly in Kazakhstan’s Kostanay and Karaganda regions.

But Japanese interest in the Caspian and Central Asian state is nothing new. While Japan is ranked amongst the world’s most developed economies, it possesses very small amounts of natural resources. This has pushed Tokyo to build partnerships with those that can supply it with the energy resources needed to keep its markets afloat.

Kazakhstan sits atop some of the world’s largest reserves of fossil fuels. Its proved reserves of hydrocarbons amount to 3.2 percent of the world’s total known oil, or about five billion tons, and 1.5 percent of the world’s known natural gas, measuring about two trillion cubic meters.

Japan has been involved in energy-related activities in Kazakhstan since the country was founded, after the dissolution of the USSR in 1991. At that time, Japanese energy companies, such as the government-backed Japan Oil, Gas and Metals National Corporation (JOGMEC), helped modernize energy-rich Kazakhstan’s Soviet-era oil refineries, as well as support mining operations in a country that has the world’s second largest deposits of uranium.

Along with interests in Kazakhstan’s energy sector, Japan is keen on strengthening its presence in other markets niches. In 2010, the logistics company Nippon Yusen Kabushiki Kaisha (NYK Line) opened a branch in Almaty, Kazakhstan’s former capital city which lies near its southern border with Kyrgyzstan, in a bid to develop logistics services for automotive, as well as other industries. In 2016-2017, Tokyo Rope Manufacturing Co., Ltd., which manufactures and sells wire ropes, steel cords, and carbon fiber composite cables, opened two factories in Almaty.

Trade between the two countries in 2016 was worth over $1 billion, with exports worth $558 million and imports reaching $552 million, according to Kazakhstan’s Statistics Committee.

“The Japanese Government will push for private investment and will support infrastructure building as well as human resource development. By doing so, business opportunities surpassing 3 trillion yen ($24.9 billion) will be created,” said Japanese Prime Minister Shinzo Abe, who was on an official visit to Astana in 2015.

Astana has been working to reduce the country’s dependence on hydrocarbons and stimulate foreign direct investment. In 2012, President Nursultan Nazarbayev introduced “Kazakhstan 2050”, a roadmap for diversifying the country’s production and export base. In 2015, he unveiled “100 concrete steps for implementing 5 institutional reforms”, a plan that outlined how the country would go about undertaking deep economic, social, judicial and political reforms. Almost two thirds of the planned changes related to business, including the development of modern and diversified energy projects that would stimulate foreign investment.

The government also extended its visa-free policy to 19 countries, and offered a return of 30 percent of capital after five years, on investments exceeding a certain amount. Policies proposed included allowing investors to be exempt from corporate income tax and land tax for ten years, as well as property tax for eight years.

Kazakhstan ranked number 35 in the World Bank’s “Doing Business 2017” ratings, published in October of last year, which put the country of 18.3 million at the top of the list of Caspian region and Central Asian states.

Kazakhstan ranked ahead of the regional giants like Russia (#40) and China (#78), and some of the world’s most developed economies, such as Italy (#50), Brazil (#123), and rapidly emerging economies like Turkey (#69), making its place holding amongst 190 countries all the more impressive.