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Mongolia, Kazakhstan, Uzbekistan: Business opportunities along the Old Silk Road

Low commodity prices and a decline in direct foreign investment have led to a slowdown in the investment climate in the Old Silk Road countries. However, Mongolia, Uzbekistan and Kazakhstan continue to offer much potential for foreign investors:
A truck drives away from a mine.
Commodities are very important for Mongolia.

In the boom years from 2010 to 2014, Mongolia was one of the fastest growing national economies in the world; since then, the impetus has been lost somewhat. The country, with 3 million inhabitants, is suffering from low commodity prices, the drastic decline in direct foreign investments and the difficult state budgetary position.

In 2016, gross domestic product (GDP) increased by just 0.4% following an increase in real terms of 2.3% in 2015 according to the International Monetary Fund (IMF). For the first quarter of 2016, the Mongolian statistical office still reported a GDP increase of 3.1%. Impetus came from industry and construction (+10.7%) and agriculture (+3.7%), while the service sector shrunk (-2.2%).

Despite the current difficult situation, medium-term prospects for the resource-rich Mongolia remain positive. From 2017, the IMF is anticipating much stronger growth rates once again (2.5% for 2017 and 5.7% for 2018). The hope of an economic upturn is connected on the one hand to the assumption that commodity prices will rise and on the other hand with the start of the second expansion stage of the Oyu Tolgoi gold and copper mine. The 5 billion US dollar project should still be started before the end of the year.

The infrastructure should also be further developed in Mongolia. This primarily involves goods connections at the borders in order to make it easier to transport coal. The long-planned train line between Tawan Tolgoi (Mongolia) and Gashuun Sukhait (China) is now being financed by the so-called “Chinggis Bond” and the World Bank with around 255 million US dollars.

Kazakhstan relies on support measures

In order to stimulate investments from Switzerland and abroad, Kazakhstan is offering companies a broad range of support measures. Investors are attracted with subsidized corporate loans, tax incentives and payments in kind. In sectors identified by the government as a priority, reimbursement of up to 30% of the capital expenditure beckons. Also, the ten special economic zones nationwide offer tax and customs exemptions.

However, only companies registered in Kazakhstan qualify to grant benefits, regardless of their origin. Central contact points for foreign investors are the export and investment support agency, Kaznex Invest and the established investment committee at the Ministry for Investment and Development.

Uzbekistan improves investment climate

As an investment location, Uzbekistan is impressive with its large commodity reserves (hydrocarbons, non-ferrous and precious metal ores, uranium and construction materials) and raw cotton, fruit and vegetables. It has a consumer market of 32 million inhabitants, low production costs and an advantageous geographical position in the heart of central Asia. The technological backlog in all economic sectors promises a wide range of business opportunities. The country is also showing stable macroeconomic development.

The government is interested in getting an increased influx of foreign capital. To this end, it has launched a wide range of support measures to improve the investment climate. Among them are development programs for industry and infrastructure as well as state funding instruments. The country offers tax incentives, tariff preferences and other benefits such as the provision of land. Conditions in the free economic zones are particularly attractive.

S-GE will help you get started in central Asia.

If you have any questions about business opportunities in central Asia, contact our advisor Daniel Bont. Contact data must be taken from the contact box.

The S-GE Trade Point in Kazakhstan is also there to support you on-site in Astana.

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