Brief introduction of investment in Kazakhstan under China’s BRI

Kazakhstan plays an important role in the construction of China’s “Belt and Road Initiative”. Though Kazakhstan has attracted various Chinese investors because of its stable political and economic environment in the past years, the differences in legal system and geographical environment will still have significant impacts on Chinese investors towards their direct or indirect investment in Kazakhstan.


As a country located in central Asia and the connection to the Persian Gulf, countries around Caspian Sea and road to Russia, Kazakhstan plays an important role in the construction of China’s “Belt and Road Initiative”. Though Kazakhstan has attracted various Chinese investors because of its stable political and economic environment in the past years, the differences in legal system and geographical environment will still have significant impacts on Chinese investors towards their direct or indirect investment in Kazakhstan. This article aims at briefly introducing Kazakhstan main legal institution related to foreign investment based on our relevant experiences.


1. Foreign investment access in Kazakhstan


Generally speaking, Kazakhstan holds a positive attitude towards foreign investment so that there are no restrictions or access limitations in most industries. However, Kazakhstan government does form a list where specific industries, such as telecommunications, construction, banking, mining investment, land investment concerning national security shall be subject to the approvals of relevant government authorities such as Kazakhstan National Bank, the Ministry of National Economy or the Ministry of Energy etc. respectively.


Meanwhile, the antimonopoly authority of Kazakhstan, Committee for Regulation of Natural Monopolies, Protection of Competition and Consumers’ Rights under the Ministry of National Economy (CREM), exercises control over economic concentration by providing prior consent to certain transactions currently. In particular, the consent of the CREM is required if an acquisition meets specific criteria. Generally, the whole procedure of applying for economic concentration may last for 45 to 50 calendar days.


Since mainland China is not the party of <Hague Convention>[1], all investors, individuals and legal entities which are incorporated under the laws of mainland China shall seek legalization of their submission documents before applying for approvals in Kazakhstan.


We suggest Chinese investors should learn about the contemplated limitations or access approvals when investing in Kazakhstan and its time limit respectively in advance in order to work out the transaction arrangement reasonably.


2. Transfer of public property in Kazakhstan


Currently, state-owned economy plays a dominant role in the market of Kazakhstan. The second stage of privatization (which has been announced pursuant to Decree of the Government of the Republic of Kazakhstan No.1141 of 30 December 2015) is now in the process throughout the whole society of Kazakhstan. The goal for such privatization is to reduce the ratio of state-owned economy to 15% or lower[2], which used to hit 65% once[3].


Under Kazakhstan law, public property in its broad interpretation has the same meaning as state-owned property/assets. Specifically, public property falls within two categories: (1) republican property and (2) municipal property. Similar to the transfer of state-owned assets in China, the transfer of Kazakhstan public property shall be subject to the specific laws & regulations in Kazakhstan. The Public Property Law of Kazakhstan envisages a possibility for regulation of transfer of the assets held by some state-owned enterprises to private sector in accordance with the rules established by itself. According to the internal rules of some state-owned enterprises in Kazakhstan, there are several methods of conducting the transfer, such as open two-stage competition, electronic auction, direct targeted sale, methods compliant with rules of relevant stock exchange and other methods proposed by independent consultants and not prohibited by Kazakhstan legislation.


If the contemplated transaction involves public property of Kazakhstan, it is suggested to design the deal structure properly in order to avoid deadlocks when conducting the transaction.


3. Governance structure of LLP in Kazakhstan


One of common legal forms of business available under the Kazakhstan law is limited liability partnership (LLP), which is conceptually similar to the limited liability companies. In accordance with the Law of On Limited and Additional Liability Partnerships in Kazakhstan, an LLP shall set up the General Meeting of Participants as supreme governing body and the Executive Body which carries out the management of daily activities. As a general rule, the Charter of an LLP may stipulate the creation and functioning of a Supervisory Board which exercises control over financial and business activity over the Executive Body. Meanwhile the General Meeting of Participants of the LLP may also decide on creation of the Inspector/Revision Committee, which exercises control over financial and business operations of the LLP. The Executive Body, Supervisory Board and Inspector/Revision Committee shall be elected and dismissed by the General Meeting of Participants and shall exercise powers according to the laws and Charter. In particular, comparing to the laws on LLC in China, there is no “legal representative” concept in an LLP. However, the LLP law allows the Executive Body to act on behalf of the LLP without Power of Attorney.


To satisfy the need for supervision, we suggest Chinese state-owned enterprises pay attention to the setup of internal governance structure of the target according to Kazakhstan laws when investing in Kazakhstan.


4. Other investment matters


For financing purposes or else, participation interest owned by participants in an LLP could be pledged. The establishment of such pledge does not require mandatory registration at local Justice Department. Regarding labor issues, Kazakhstan implements strict work permit institution towards foreigners. Pursuant to Kazakhstan migration laws work permits are required for all foreign employees, except those who are specifically exempt by the legislation. The requirements for obtaining work permits differ depending on the category of the employee. Nonetheless, it is worth mentioning that head of an LLP with 100% foreign participation interest in the charter capital and head of the branches of foreign legal entities are exempt from the requirement to obtain a work permit. The currency control shall be considered as well, acquisition which is subject to direct investment, i.e., investors acquiring more than 10% voting rights of a legal entity and the amount of the Share Purchase Agreement (SPA) exceeding USD 500,000 regulated by the Law on Currency Control in Kazakhstan would need to seek registration of the SPA with the National Bank of Kazakhstan. The Law on Currency Control also provides specific treatment for the other types of currency transactions depending on their substance and structure. Please note that starting 1 July 2019 a new Law on Currency Control would enter into force which could affect the currency regime applied to certain transactions.


In conclusion, based on our Kazakhstan transaction experiences, we suggest that Chinese investors should learn about the legal institution of Kazakhstan related to the contemplated acquisition and realize relevant legal risks thereof in advance, in order to achieve a win-win transaction with Kazakhstan by proper transaction structure and transaction documents.


This material has been prepared for general informational purposes only and is not intended to be relied upon as law, accounting, tax or other professional advice. Please refer to your advisors for specific advice.


[1] The Convention abolishing the requirement of legalization for foreign public documents adopted in Hague on 5 October 1961.

[2] Economic and Commercial Counsellor's Office of the Embassy of the People's Republic of China in Kazakhstan <Nazarbayev talks about the privatization of Kazakhstan's state-owned enterprises>, 14 Nov 2018,, 14 May 2019.

[3] <【Five countries located in central Asia】Minister of the Ministry of National Economy of Kazakhstan: the modernization of Kazakhstan will start from the privatization of state-owned enterprises>, 18 Dec 2017,,14 May 2019.


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