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WB Report: Subnational Doing Business in Kazakhstan 2017

Kazakhstan Can Improve its Business Climate by Simplifying Procedures

Tuesday 6 June 2017, by Azadeh KHANDANI

ASTANA (World Bank press service) — Entrepreneurs in Kazakhstan navigate a wide range of regulatory practices, depending on where they start and operate their business, says the World Bank Group’s Subnational Doing Business in Kazakhstan 2017 report, released today.

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Doing Business in Khazakhstan 2017 (PDF)
This report was produced by the Global Indicators Group of the World Bank Group at the request of the Ministry of National Economy of the Republic of Kazakhstan. It uses the same methodology as the global Doing Business report published annually by the World Bank Group. Results obtained for the eight Kazakh locations measured can thus be compared with 189 other economies included in the global Doing Business report.
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Doing business in Kazakhstan can be complex, but it is relatively inexpensive, finds the report, which covers the capital city of Astana, Almaty city, and six regions represented by the following cities: Aktobe, Karagandy, Kostanay, Pavlodar, Oskemen and Shymkent.

Four times over the last decade, Kazakhstan has been among the top global reformers, according to the World Bank’s Doing Business report, with the country placing 35th in the most recent 2017 edition. In the annual report, Kazakhstan is represented by Almaty, the largest business city — but Almaty does not tell the full story. The government decided, therefore, to extend the study to help other regions identify bottlenecks and learn best practices from each other.

Kazakhstan’s first Subnational Doing Business study measures business regulation in four areas: Starting a Business, Dealing with Construction Permits, Getting Electricity and Registering Property.

The report finds that Dealing with Construction Permits and Getting Electricity are the areas where local authorities have the most autonomy in developing and implementing regulatory rules. With the exception of Registering Property, the areas measured by the report require more procedures in Kazakhstan than in high-income OECD economies or in the Europe and Central Asia region, on average. For example, Starting a Business involves the same bottlenecks across all locations in the country. The time required to start a business is relatively uniform, with the fastest location being Astana (8.5 days), only slightly faster than the slowest locations: Aktobe, Kostanay and Oskemen (10 days). The time required to start a business in Kazakhstan is high compared to regional neighbours, including Uzbekistan (5.5 days) and Ukraine (5 days).

The cost of transferring property in Kazakhstan, at only 0.1% of the property value, puts the country amongst the world’s top 10 performers in this category. With regard to the cost of starting a business, all eight Kazakh locations rank among the top 20 percent of economies worldwide, thanks to minimal fees for registering a small or medium-size enterprise.

Across the four regulatory areas covered by the report, Almaty city is the most business-friendly. In the area of Getting Electricity, for example, Almaty city is the only location where the authorization to carry out ground works can be requested online. Almaty city was also an early starter in monitoring electricity outages and using automated tools to restore service. Astana leads in the area of Starting a Business, but lags behind on aggregate, mainly because of the complexity in connecting a warehouse to the electricity grid.

“The good news is there is no need to reinvent the wheel. Kazakh locations lagging in the ease of doing business can achieve tangible improvements by introducing measures already successfully implemented elsewhere in the country. Sharing the same national legal and regulatory framework makes it easier to replicate local good practices, which can make a big difference in the life of a small or medium-sized firm”, said Mierta Capaul, Manager of the Subnational Doing Business program at the World Bank.

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Kazakhstan has made big strides since 2003 in improving the process to start a business
The most recent improvements have been achieved under the Kazakhstan 2050 Strategy (announced in December 2012), which sets a series of seven economic, social and political objectives, including “comprehensive support of entrepreneurship”. With the goal of becoming one of the 30 most developed economies by 2050, Kazakhstan aims to transform itself into a diversified, knowledge-based economy driven by the private sector.

Kazakhstan has established an excellent track record of passing new laws and continually improving business regulations. Over the past five years, for example, Kazakhstan has improved efficiency in construction permitting by implementing a single window for project approvals, replacing some permitting procedures with notifications and expanding the role of private sector experts.

“Designing and implementing a reform plan to improve the business climate is a challenging task because it requires the participation of multiple government agencies, as well as coordination efforts and technical capacity. But business regulation reforms can have large payoffs for sustainable and inclusive growth. In Kazakhstan, sharing successful reform experiences with all can play a crucial part”, said Ato Brown, World Bank Country Manager for Kazakhstan.

Main findings

  1. Where entrepreneurs in Kazakhstan establish their business matters for the regulatory hurdles they face. Regulatory efficiency varies substantially across locations in two of the four areas benchmarked — dealing with construction permits and getting electricity — because of differences in local interpretations of the law and in the level of implementation of recent reforms.
  2. Almaty city, which tends to be prompter than other locations to implement new reforms, has the most business-friendly regulation. The capital city, Astana, which is often selected to pilot reforms, brings up the rear.
  3. Good practices can be found across Kazakhstan in all four areas of regulation covered. Reform-minded policy makers can make tangible improvements by replicating measures already successfully implemented within the country.
  4. There is still room to streamline business regulation — and as Kazakhstan seeks to move closer to the regulatory frontier, it could look beyond its borders to examples of good practice around the world.

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