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Forget Borat: WTO puts Kazakhstan on map

Astana, KazakhstanSTANISLAV FILIPPOV | AFP | Getty Images

Astana, Kazakhstan

Central Asia's largest economy will finally become a World Trade Organization (WTO) member this year, but that alone is unlikely to be a panacea for investor concerns.

After 20 years of discussions, Astana at long last completed negotiations on WTO ascension last month, paving the way for official membership by year-end, in what the international trade body described as "one of the most challenging negotiations" in its history. Following the landmark decision, Kazakh President Nursultan Nazarbayev said WTO acceptance would make the country a more attractive place for both foreign and domestic investors.

The news has certainly made Astana more attractive. Last week, President Nazarbayev travelled to Milan where he signed deals worth $500 million in a range of industries spanning from agricultural machinery to textiles. Meanwhile, Indian Prime Minister Narendra Modi arrived in the oil-rich nation this week, where he is widely expected to announce a slew of mining-related projects.

"Though a noteworthy achievement and step in the right direction, firms should not overestimate the impact of Kazakhstan's WTO accession on the investment climate or on the economy, " argued Mark McNamee, central and eastern European analyst at Frontier Strategy Group.

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Under its new membership, Astana will lower import tariff rates, allow foreign firms to distribute pharmaceutical and medical products wholesale in five years' time and eliminate foreign equity limitations in the telecom sector, which currently stand at 49 percent. Such measures could have a positive impact on the corporate operating environment, but only if government takes deliberate steps to diversify and liberalize the economy, McNamee explained.

Risk consultant Verisk Maplecroft echoed that sentiment in a recent report, calling WTO membership "an event that is likely to be a clear reputational win for the government, but bring little additional change for investors."

The WTO agreement also failed to address every key barrier to investment, Verisk Maplecroft pointed out: "Disagreements about the amount of permitted agricultural subsidies, which present foreign agricultural investors with non-tariff barriers, have reportedly not been resolved yet." Meanwhile, most caps on foreign ownership remain intact like the 20 percent ceiling on media outlets and 49 percent limit on air transportation services.

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