Kazakhstan pushing to improve economic transparency

By bne IntelliNews July 1, 2014

bne -

 

Kazakhstan has passed legislation on its latest bid to legalise shadow capital and property, as well as moves to clamp down on money laundering, as part of a plan that ultimately seeks to make the country more attractive to investors.

Kazakh President Nursultan Nazarbayev on June 30 signed a bill that will allow the legalisation of shadow capital and property starting on September 1. It will run until the end of 2015. Astana says it hopes the 16-month campaign will bring as much as $12bn out of the grey economy.

The move is part of a wider effort by Astana to bring greater transparency to the country's capital flows. Nazarbayev also signed amendments to legislation on Kazakhstan's ratification of the EU's anti-money laundering convention, which if finally joined in 2011 - close to a decade after it first applied.

Money legalised during the campaign will be deposited in special savings accounts at commercial banks, or invested in domestic assets, Deputy Prime Minister and Finance Minister Bakhyt Sultanov told a news conference when plans for the amnesty were first announced in May.

Kazakhs will be able to deposit their previously illicit cash for five years at market interest rates (up to 10.5% for tenge-denominated deposits). Alternatively, they will be able to invest it in government securities, bonds issued by banks and state companies, shares floated as part of the "People's IPO" programme and stocks traded on the Kazakh Stock Exchange. Those wishing to get their hands on hard cash sooner will pay a penalty.

"In future citizens themselves will choose an instrument of legalisation. If a citizen legalising money doesn't want to use available mechanisms of investment, they can dispose [of] their money as they wish," Sultanov said. "If they withdraw this money they will pay a levy worth 10% of money legalised."

Legalised money and property will be exempt from income tax. The law rules out the legalisation of property and money received as a result of criminal or corrupt activities. 

Sultanov said he expects to see $10-12bn emerge from the shadows. According to government estimates, the grey economy equates to around 20% of the official economy. Kazakhstan's GDP stood at $221bn in 2013.

That's despite two previous campaigns to legalise shadow capital and undocumented property. The first amnesty in 2001 saw around 3,000 Kazakh citizens legalise a total of $480m in a 20-day campaign. In 2006-2007, $5.3bn ($3bn in money and $2.3bn in property) was declared.

Clean-up campaign

The ultimate aim is to help attract additional funds and investment to the economy, Finance Minister Bakyt Sultanov said according to local media.

The Kazakh parliament adopted a new criminal code on June 11, toughening punishment for money-laundering, income from illegal activity and terrorism funding. The hope is that the toughened measures will encourage a greater uptake of the legalisation campaign. The new criminal code has now been sent to the president for signing.

In March, the Kazakh financial police announced it is to step up efforts to clamp down on capital flight to offshore accounts and to improve transparency over ownership. Olzhas Bektenov of Kazakhstan's Agency for Combating Economic Crimes and Corruption added "the lack of transparency in the structure of ownership in strategic Kazakh companies," is also a pressing problem. "Currently, the identification of the ultimate beneficiary is not possible," he said. 

In February, one Kazakh deputy proposed the country should create its own offshore zone, in a bid to keep capital from leaving the country. "Kazakhstan invested $3.6bn in the Virgin Islands, $2.6bn in the Seychelles, and $1.9bn in Cyprus," claimed Tursunbek Omurzakov, according to Trend.

The MP also noted that a Russian plan for an offshore zone in the far east creates additional risk of capital flight, as there will be no restriction on money flows within the Eurasian Economic Union. "We should work with such countries: sign agreements and exchange tax information," he demanded.

 

Related Articles

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

EU, US partly suspend Belarus sanctions for four months

bne IntelliNews - The Council of the European Union (EU) has suspended for four months the asset ... more

bne:Chart - CEE/CIS countries perform particularly well in World Bank's "Doing Business 2016" survey

Henry Kirby in London - Central and Eastern Europe and the Commonwealth of Independent States’ (CEE/CIS) countries performed particularly well in the World ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss