Central Asia Profile

Central Asia: Central Asia stretches from the Caspian Sea in the west to China in the east and
from Afghanistan in the south to Russia in the north. It is also colloquially referred to as "the -
stans" as the countries generally considered to be within the region all have names ending with
the Persian suffix "-stan", meaning "land of". Central Asia has historically been closely tied to
its nomadic peoples and the Silk Road. It has acted as a crossroads for the movement of people,
goods, and ideas between Europe, Western Asia, South Asia, and East Asia. The Silk Road
connected Muslim lands with the people of Europe, India, and China. This crossroads position
has intensified the conflict between tribalism and traditionalism and modernization.

1|Page
Central Asia is an extremely large region of varied geography, including high passes and
mountains (Tian Shan), vast deserts (Kyzyl Kum, Taklamakan), and especially treeless, grassy
steppes. Much of the land of Central Asia is too dry or too rugged for farming. The Gobi desert
extends from the foot of the Pamirs, 77° E, to the Great Khingan (Da Hinggan) Mountains, 116°–
118° E. Major rivers of the region include the Amu Darya, the Syr Darya, Irtysh, the Hari River
and the Murghab River. Major bodies of water include the Aral Sea and Lake Balkhash, both of
which are part of the huge west-central Asian endorheic basin that also includes the Caspian
Sea. A majority of the people earn a living by herding livestock. Industrial activity centers in the
region's cities.

Kazakhstan: Kazakhstan is a large landlocked country in Central Asia. With an area of 2.7
million sq. km, it is nearly four times the size of Texas. It has a continental climate that is mostly
arid or semiarid. Kazakhstan contains plains, mountains, desert, and oases. Its low point is
below sea level (-132 m) and its highest point is 6.995 m above sea level. Portions of the
country are subject to earthquakes.

Kazakhstan has a population of about 16.8 million people. Nearly half of the people are Kazakh,
but there is a large (34.7%) Russian population (mostly the result of Russians who moved in
under Russification when it was part of the Soviet Union). Almost half of the population is
Muslim (47%), and slightly less is Russian Orthodox (44%). The state language is Kazakh, but the
official language used in everyday business is Russian.

Kazakhstan is a republic. The chief of state is the president, who is elected by popular vote. The
president appoints a prime minister as the head of government. There is a bicameral legislature
and a judicial branch with a supreme court. The capital is Astana (it was moved from Almaty in
1998).

2|Page
Kazakhstan is rich in fossil fuel reserves and other minerals and metals. Furthermore, its vast
steppes can accommodate considerable agricultural development. The government's challenge
will be to continue development of these resources as well as continue the transition to
privatization. Kazakhstan's exports include oil, metals, chemicals, grain, wool, meat, and coal.
Its imports include machinery and parts, industrial materials, oil and gas, and consumer goods.
Its main trading partners include Russia, Ukraine, UK, Germany, and Uzbekistan.

Kazakhstan has 14,400 km of railways (not including industrial lines). It has 141,000 km of
highways (104,200 km paved). It has over 7,800 km of pipelines, and nine of its 10 airports have
paved runways.

3|Page
Kyrgyzstan: A landlocked country in Central Asia, Kyrgyzstan gained its independence after the
collapse of the Soviet Union in 1991. With an area of 198,500 sq. km, it is slightly smaller than
South Dakota. Kyrgyzstan's climate is continental, but because of its large range in altitude (132
m to 7,439 m), it actually varies from polar in the high Tien Shan to temperate in the northern
foothills to subtropical in the Fergana Valley.

Kyrgyzstan's population of about 4.5 million people is mostly Kirghiz (52.4%) with significant
Russian and Uzbek populations. About three-quarters of the population are Muslim, and most
of the rest are Russian Orthodox. The official languages are Kirghiz and Russian. Kyrgyzstan has
a moderately high infant mortality rate (75.9 deaths per thousand live births) and a life
expectancy of 63.6 years.

Kyrgyzstan is a republic. The chief of state is the president, who is elected by popular vote. The
president appoints a prime minister as the head of government. There is a bicameral legislature
and a judicial branch with several levels of courts.

Kyrgyzstan is a small, poor, mountainous country with a predominantly agricultural economy.

Cotton, wool, and meat are the main agricultural products and exports. Industrial exports
include gold, mercury, uranium, and hydropower. Kyrgyzstan has been one of the most
progressive countries of the former Soviet Union in carrying out market reforms. Its imports
include grain, lumber, industrial products, ferrous materials, fuels, machinery, and textiles. Its
main trading partners include China, UK, Turkey, and Germany.

Kyrgyzstan has 370 km of railways (not including industrial lines). Most of its 18,500 km of
highways are paved. Fourteen of its 54 airports have paved runways.

4|Page
Tajikistan: Tajikistan is a landlocked nation in Central Asia with 143,100 sq. km of area (slightly
smaller than Wisconsin). It has a continental climate that ranges from semiarid to polar in the
Pamir Mountains. These mountains dominate the landscape, interspersed with several valleys.

The population of Tajikistan numbers about 6.1 million people. Tajik peoples make up more
than half of the population (65%) with Uzbeks making up the next largest group (25%). Most of
the people are Sunni Muslim (80%). The official language is Tajik, although Russian is widely
used in government and business. Tajikistan has a high infant mortality rate (114.8 deaths per
thousand live births) and an average life expectancy of 64.3 years.

Tajikistan is a republic. The chief of state is the president, who is elected by popular vote. The
president appoints a prime minister as the head of government. There is a unicameral

5|Page
legislature and a judicial branch with a supreme court. The capital is Dushanbe. Tajikistan has
experienced three changes of government and a civil war since it gained independence in
September 1991, when the USSR collapsed. A peace agreement was signed in June 1997, but
implementation is progressing slowly. Russian-led peacekeeping troops are deployed
throughout the country, and Russian-commanded border guards are stationed along the
Tajikistani-Afghan border.

Tajikistan has the lowest per capita GDP among the former Soviet republics. Agriculture
dominates the economy, with cotton the most important crop. Mineral resources, varied but
limited in amount, include silver, gold, uranium, and tungsten. Industry consists of only a large
aluminum plant, hydropower facilities, and small obsolete factories mostly in light industry and
food processing. The Tajikistani economy has been gravely weakened by five years of civil
conflict and by the loss of subsidies from Moscow and of markets for its products. Tajikistan
thus depends on aid from Russia and Uzbekistan and on international humanitarian assistance
for much of its basic subsistence needs. Tajikistan's exports include cotton, aluminum, fruits,
vegetable oil, and textiles. It imports fuel, chemicals, machinery and transport equipment,
textiles, and foodstuffs. Its main trading partners include members of the former Soviet Union.

Tajikistan has 480 km of railways and 13,700 km of highways (11,330 km paved). Fourteen of its
59 airports have paved runways.

6|Page
Uzbekistan:

Uzbekistan is one of the former Soviet states. It is a landlocked nation in Central Asia with an
area of about 447,400 sq. km that makes it slightly larger than California. Its climate is mostly
midlatitude desert with semiarid grassland in the east. It also includes the southern portion of
the shrinking Aral Sea. Most of the terrain is marked by sandy desert. The river valleys are
intensely irrigated. Uzbekistan's population of just over 24 million people is mostly Uzbek
(80%). Most of the population (88%) is Muslim. The main language is Uzbek, although Russian
and other Central Asian tongues are spoken. Like other nations of the region, Uzbekistan has a

7|Page
moderately high infant mortality rate (71.6 deaths per thousand live births) and a moderate
average life expectancy (63.9 years).

Uzbekistan is a republic, although there is little power outside the executive branch. The
Supreme Soviet elected the president when Uzbekistan was still part of the Soviet Union and
was extended until 2000 by a public referendum. The president appoints the prime minister.
There is a unicameral legislature and a supreme court. Uzbekistan has 3,380 km of railways. It
has 81,600 km of highways, 71,237 of which are paved. All three of its airports have paved
runways.

Once one of the poorest areas of the former Soviet Union, Uzbekistan is now the third-largest
cotton exporter. It is also a major producer of gold and natural gas. However, it has tried to
maintain a Soviet-style command economy that has resulted in economic difficulties. The
government has made some reforms designed to aid privatization, but it still maintains
significant control in the economy. In addition to the items mentioned above, Uzbekistan
exports mineral fertilizers, ferrous metals, textiles, food products, and autos. It imports grain,
machinery and parts, consumer durables, and other foods. Its main trading partners include
Russia, Eastern Europe, Western Europe, and other members of the former Soviet Union.

8|Page
Turkmenistan: Turkmenistan, landlocked itself, is a Central Asian country bordering the
landlocked Caspian Sea. With an area of 488,100 sq. km, it is slightly larger than California.
Most of its climate is subtropical desert. Its terrain is mostly flat or rolling desert with
mountains in the south.

More than three-quarters of Turkmenistan's population of 4.4 million people are Turkmen.
Most of the remainder are other Central Asian ethnic groups. Most of the population (89%) is
Muslim. The main language is Turkmen. Like many other nations of the region, Turkmenistan
has a relatively high infant mortality rate (73.1 deaths per thousand live births) and a moderate
average life expectancy (61.1 years).

9|Page
Turkmenistan is a republic. The president is the chief of state and the head of government.
There are two parliamentary bodies and a supreme court. The capital is Ashgabat.

Turkmenistan is largely desert country with nomadic cattle raising, intensive agriculture in
irrigated oases, and huge gas and oil resources. One-half of its irrigated land is planted in
cotton, making it the world's tenth-largest producer. It also possesses the world's fifth-largest
reserves of natural gas and substantial oil resources. With an authoritarian ex-communist
regime in power and a tribally based social structure, Turkmenistan has taken a cautious
approach to economic reform, hoping to use gas and cotton sales to sustain its inefficient
economy. Privatization goals remain limited. Its principal exports include natural gas, cotton,
petroleum products, textiles, electricity, and carpets. It imports machinery and parts, grain and
food, plastics and rubber, and consumer durables. Its main trading partners include countries of
the former Soviet Union, Germany, and Turkey.

Turkmenistan has 2,187 km of railways. It has 24,000 km of highways, of which about 19,488
km are paved. It has just less than 5,000 km of pipelines for crude oil and natural gas. It has 64
airports, 22 of which have paved runways.

10 | P a g e
Azerbaijan: Azerbaijan is a landlocked country in Central Asia. Its area is divided and, including
the exclave of Naxcivan, includes 86,600 sq. km that makes it slightly smaller than Maine. Its
climate is dry, semiarid steppe. Its terrain is mostly flat lowland (much of which is below sea
level) rising to the Great Caucasus Mountains in the north. A portion juts out into the
landlocked Caspian Sea. Some areas are subject to droughts. Azerbaijan's population numbers

11 | P a g e
about 7.9 million people. Its main ethnic group is Azeri (90%). Most of the population (93.4%) is
Muslim. The main language spoken is Aseri. Although not as bad as many Sub-Saharan African
nations, Azerbaijan has a moderately high infant mortality rate (82.5 deaths per thousand live
births) and a moderate life expectancy (63 years average).

Azerbaijan is a republic. The chief of state is the president, who is elected by popular vote. The
president appoints a prime minister as the head of government. There is a unicameral
legislature and a judicial branch with several levels of courts. The capital is Baku. Azerbaijan is
the least developed of the Caucasian states. Like many other Central Asian states, it has a
majority Muslim population, high unemployment, and low standard of living. Its principal
exports are oil, cotton, and natural gas. It suffers from many of the same problems as other
former Soviet states in trying to change from a centrally planned economy to a market
economy but is fortunate in that it has energy resources that help its future prospects.
Azerbaijan's exports include oil and gas, chemicals, oilfield equipment, textiles, and cotton. Its
imports include machinery and parts, consumer durables, foodstuffs, and textiles. Its main
trading partners include other former Soviet states, Turkey, and European countries. Azerbaijan
has over 2,000 km of railways. Most of its 57,770 km of highways are paved. It has over 2,500
km of pipelines, and 29 of its 69 airports have paved runways.

12 | P a g e
13 | P a g e
Potential for Multinationals in Kazakhstan:
Since Kazakhstan gained its independence from the Soviet Union in 1991, investment in and
trade with Kazakhstan has received growing attention from all over the world. Following the
independence, Kazakhstan entered a transition period which has been marked by economic
restructuring efforts and supporting reform initiatives in various aspects of the business
environment. Many experts believe that the increasing foreign direct investment with
technology and the accelerated development of foreign trade will speed up the economic
transition in the country. The Kazakh government aims to attract further foreign direct
investment to the country in the immediate future. With the assistance of foreign businesses,
Kazakhstan intends to import the latest technology and products as well as the management
know-how so as to improve its economic condition and infrastructure. Kazakhstan possesses a
tremendous economic potential, and the impressive economic growth rate already
demonstrated in the recent years is expected to be even higher in the future.

Kazakhstan has transition economy with lagging system, a vast amount of natural resources,
lack of commercial technology, and few business organizations while the resources there may
afford a large number of business organizations. That’s why MNCs are aiming to enter the
country with strategic purpose and to reap the benefit of untouched market with huge
potential.

In specific, MNCs should invest in Kazakhstan because it has;

1. Rich Natural Resources

One of the main treasures of Kazakhstan is its natural resources. Kazakhstan is at the 6-th
place in world reserves of natural resources. Out of 110 elements of the periodic table, 99
were discovered in the bowels of Kazakhstan, 70 explored, 60 extracted and used: oil, gas,
uranium, zinc, tungsten, bohrium, silver, lead, chromites, copper, fluorides, molybdenum,
and gold.
Mineral resources base of Kazakhstan consists of 5004 deposits, the forecasted cost of
which is about 46 billion USD.

14 | P a g e
 Across the globe Kazakhstan is already the largest producer of tungsten, and in reserves of
tungsten Kazakhstan is at the first place in the world, at second - in the reserves of chrome
and phosphate, at fourth - in lead and molybdenum resources, at eighth - in general
reserves of iron stone (16,6 billion tones) after Brazil, Australia, Canada, USA, India, Russia
and Ukraine.

So far only 160 oil and gas deposits have been explored in Kazakhstan, and withdrawn oil
stock account for 2,7 billion tons. However, not all of these deposits, not to mention the
entire pools, are explored. In the event of their competent use and operation Kazakhstan in
its oil potential won't yield to Saudi Arabia, Kuwait, United Arab Emirates. Satellite pictures
of the past years, as well as ground investigations suggest that main operating in the West
Kzakhstan oilfields adjacent to Caspian Sea coastline - Tengiz, Prorva, Kalamkas,
Karazhanbas - are just an "outskirt" of the deep oil pool, the core of which lies in northern
part of the Caspian Sea, where total reserves are characterized by very impressive sizes - 3-
3,5 billion tons of oil and 2-2,5 trillion cubic gas meters.

In modern Kazakhstan about 300 significant gold deposits are forecasted and 173 of them
are explored. Among them are such that will produce gem diamonds. With significant
investment literally in few years Kazakhstan will be able to produce 100 tons of gold
annually; today it produces only 1 % of its underground pool, which give the right to
Kazakhstan to be at 6-th place in the world.

Over 100 coal deposits are explored at the territory of Kazakhstan, the largest of them are:
Ekibastuz field, which is notable for large lignite bed thickness, and Karaganda coal pool
with over 50 billion tons reserves of coking coal. In the best years of operation, mentioned
pools produced only 131 million tons of black coal.

15 | P a g e
 Kazakhstan is also rich in deposits of chemical raw materials: richest deposits of potash and
other salts, borates, bromine compounds, sulfates, phosphate chalks, deposits of the most
varied raw materials for paint and coatings industry. Huge reserves of sulfur in the
composition of complex ore allow widely organizing the production of sulfuric acid and
other chemical products extremely essential for economy. There are unlimited
opportunities for production of almost all types of petrochemical synthesis products
(especially ethylene, polypropylene and rubber material), synthetic detergents and soap
production, feed microbiological protein, chemical fiber, cement, synthetic resin and
plastics.

Kazakhstan has richest material resources for glass and porcelain industry at its disposal. Its
soils and mountains contain the rarest jewels, various construction and facing materials.
Other overwhelming wealth of Kazakh land includes mineral, medicinal, industrial and
thermal waters, which have not found their extensive application yet.

2. Political Stability

Issues of maintaining political stability have always been at the forefront of the country's
government. Primarily this is to ensure an interethnic balance.

As a result of sophisticated political strategy, which provides equal rights and equal
opportunities regardless of nationality, Kazakhstan has managed to turn multi-ethnicity
from the force of potential risk into competitive advantage.

Political stability enabled the republic to create clear and transparent conditions for foreign
investment attraction, which broadly predetermined economic success of the country.

16 | P a g e
 3. Sustained Economic Growth

The GDP of Kazakhstan is growing at a steady pace and reached 134 billion USD in 2009.
Beginning from 2000 the GDP growth amounts to 8-10% annually. Kazakhstan has one of
the best indexes of the GDP per capita among the CIS countries.

4. Industrial and Innovative Development

Kazakhstan has established base institutional elements of industrial development:

* National fund, which ensures economic stability;

* JSC "FNB "Samruk-Kazyna" consolidating the potential of the state to implement cutting-
edge areas;
* Development institutions accompanying the process of diversification;
* Dialogue platforms for interaction and coordination of government and business actions.

The National program of forced industrial and innovative development for 2010-2014 was
adopted in 2010, main goals of this are: creation of new export-oriented high-tech
industries, infrastructure development, reinforcement of the national innovative system,
enhancement of local personnel qualification.

Within the frame of forced industrial and innovative development, the work is carried out
to establish attractive conditions for investors ready to implement projects in the following
priority sectors of economy:

* Oil refining and infrastructure of oil and gas sector, ore mining and smelting complex,
nuclear and chemical industries with subsequent transition of rough manufacture to higher
processing stages;
* Mechanical industry, construction, pharmaceutical industry

17 | P a g e
 * Agricultural sector, consumer industry, tourism;
* Information and communication technologies, biological technology, alternative power,
space activities.

5. Favorable Location

Kazakhstan is located in the heart of Eurasia, main transcontinental roots connecting Asian
and Pacific region with the Middle East and Europe pass through Kazakhstan. Unique
geographic location of Kazakhstan at the crossing of Europe and Asia guarantees transit
traffic through significant markets in Europe and Asia, with a total population of 0, 25
million people.

6. Investor Protection of Rights

To attract overseas capital into the economy of the Republic of Kazakhstan, to reduce
investment risks, to provide the system that guarantees the protection of foreign
investments, overseas investors are given the national status, i.e. foreign and domestic
companies have equal conditions for investment activities.

7. Investment Preferences and Incentives

Attraction and effective use of foreign investment is one of the main courses of mutually
beneficial trade and economic cooperation between the Republic of Kazakhstan and other
countries.

Kazakhstan aimed at creating favorable conditions for successful operation of local and
foreign investors in the republic, investment attraction to non-oil and gas sector.

Detailed information is available in Section 3. State investment support.

18 | P a g e
 8. Favorable Business Climate

In Kazakhstan, close enough attention is drawn to all issues of favorable business climate for
investors: the reduction of administrative barriers and simplification of procedures,
enhancement of the efficiency of law and judicial systems, improvement of customs and tax
administration.

In the past two years, Kazakhstan leads the list of 10 countries, which achieved the greatest
success in creating a friendly environment for business.

According to the rating of the World"s Bank the "Doing Business" Kazakhstan taking the 59-
th place in 2010 has left behind its nearest neighbors Russia and China, as well as the Czech
Republic and Ukraine.

9. The Presence and Success of Early Multinational Investors in Kazakhstan

Since 1992, foreign investment companies have begun to operate actively within the Kazakh
market. Such multinational companies as Chevron, Siemens, General Electric, Danone,
Coca-Cola, Henkel, Toshiba, LG Electronics, Shell, Eni, Microsoft, BAE Systems and others
successfully operate in Kazakhstan.

In whole, since 1993, Kazakhstan has obtained foreign direct investment in the amount of
118 billion USD.

10. Infrastructure

One of the key factors for effective development of economic sectors is the availability of an
adequate communication and transport infrastructure, thus Kazakhstan is constantly

19 | P a g e
 working on the improvement of its own infrastructure.

Owing to the investment attraction into various economic sectors, Kazakhstan will continue
rapidly develop its infrastructure within the next five or ten years.

With a vast amount of resources, investment friendly government policy, protection rights
for MNCs, Kazakhstan is now gaining the attention of many MNCs to invest there. These
factors mentioned above will pay off the MNCs if the invest there.

20 | P a g e