Kazakhstan’s national branding and fdi attraction: review of key milestones

Abstract. Kazakhstan is a young, developing and modern country. Since its independence in 1991 it showed a great development and improvement towards market economy. Today (2020), according to the World Bank Kazakhstan is ranked 25 in doing Business Index (2020), which shows a significant upward trend since 2019 when Kazakhstan was ranked at 28th position. However, the national and destination branding are, arguably, more complicated areas due to the fact that they are to some extent directly linked to the emotional side of the target audience. The interpretation of the brand may change due to these four factors: educational and personal background, character and geographical position. At this stage Kazakhstan is already implementing promotional strategies, however one might argue that they are not under the same promotional umbrella, which debatably, decreases the process of spreading awareness of Kazakhstan. This leads to the gap in development and promotion of National brand and limits the attraction of FdI.

Introduction

Kazakhstan is in a strategic position between China, Russia and Central Asian countries and connecting it with Europe. Kazakhstan’s political strategy implementation allowed her to generate about 60 percent of total GdP of Central Asian region [15]. The steps such as the introduction of principle “one-stop shop” allowed investors to receive all needed support services in one place at the same time with minimum bureaucratic barriers. Moreover, it allows transparent monitoring of the post-investment period progress. Other steps

include investment incentives such as 10-year exemption from land taxes and 8- year exemption from property taxes, up to 10-years exemption from corporate income tax, and reimbursement of 30 percent of actual investment in fixed assets [14]. All of these steps definitely created the basis for national promotion and attracting investment to the Republic of Kazakhstan as a prosperous and progressive market and a stable economy for foreign investment. Kazakhstan improves and tries to build a perfect foundation for businesses to work in various sectors and government doing its best to collaborate with different countries.

National branding and reputation - as well as similar concepts in the business world - are of delicate nature although their establishment and slow but steady progress can take many years, whereas the status or image can be tarnished in a matter of hours. With regard to the change of perception, it is judged not just by words but also by deeds.

This writing will be based on the review of the main steps that would allow Kazakhstan to increase awareness and, consequently, would lead to the growth of FdI flow into the country. It will broadly consider the main areas such as brand construction, investments and logistics that would push further growth of the country.

The proposed conceptual framework that would allow Kazakhstan to increase its awareness (construct the National brand image) and would positively impact the growth of FdI flow to the country is based on three main steps. They are brand construction, logistics and investments. In particular each step will be discussed in the next chapter.

The proposed conceptual framework for this study is displayed in Figure 1.

Methodology

This is a conceptual paper and the writing is mainly based upon the secondary research. As a part of the secondary data the electronic resources, databases, articles and reports were used in order to get up to date and reliable materials.

Theoretical overview and Discussion

Brand construction

When it comes to the national branding, one might state that competitive national identity – is one of the significant components of the successful brand, especially, in the globalized world. A coun-

try’s development relies on the image, perception and reputation of the country. This creates a basis that helps attract investments, which leads to the development of government’s economy and, consequently, to the growth of the country, which has its impact on the brand image of this country. It can be stated that Kazakhstan’s effective brand image may allow the country to increase its development via speeding the process of establishing its reputation on the World arena as a stable economy, quickly modernizing nation. One might note that culture and values, such as tolerance and hospitality are the strong points of Kazakhstan that attract tourists and visitors and have a positive impact on the economic growth of Kazakhstan. In this regard Kazakhstan faces challenges, for example, weak infrastructure, lack of knowledge and education in the English language among the natives, consequently, these points repel foreign visitors, which leads to weak brand image. The extensive investigation and analysis of Kazakhstan’s national and international challenges are vital in order to identify strengths, weaknesses, threats, opportunities and the environment for the advanced and improved brand. The national branding strategy would gain by identifying key places, regions with a high concentration of the potential investors, target audience with a higher ability of financial costs. For example, for some target audience Kazakhstan may be regarded as a Switzerland in Central Asia. due to the fact that there are mountains and other natural beauties in Kazakhstan (which may be regarded as a unique selling point) that would allow to position itself as a luxury skiing resort with affordable price in comparison with Switzerland or Austria.

Another significant milestone is to identify the main communication message and create the best possible communication strategy for Kazakhstan’s brand awareness. This will represent the main idea of Kazakhstan as a nation and as a contemporary country that is attractive to various target audience: from businesses and executives to travelers and occasional visitors. In order to accomplish this step, it is essential to understand the communication flow before finding the appropriate strategy. According to Lasswell's theory in order to find a proper communication strategy for a government, it is vital to understand what the communication flow is. Referring to Lasswell's theory of communication it includes the following: “Who ... says what ... in which channel ... to whom ... with what effect” [1]. This model depicts that the main steps of communication flow are: who sends the certain message; the channel, which is used to promote and send this message, and, who is the receiver of this message (in our case it would be investors, travelers, business people outside Kazakhstan) and, fundamentally, what effect this message should have on the targeted audience. In the case of Kazakhstan's national branding communication strategy, the desired effect would be to increase the investment to the country, and consequently develop the economy and the government further. The ultimate aim will be the promotion of Kazakhstan’s positive image abroad.

The main idea is to develop strategy that would create a brand that would strengthen the current position and perception of Kazakhstan (e.g. culture, heritage, a strong financial sector), as opposed to a negative perception of weak areas (e.g. infrastructure).

The establishment of a strong confident national brand would lead to the rise of Kazakhstan’s voice and footmarks in attracting investment to the state and provide a clear message to the World regarding the openness of Kazakhstan to industries and businesses. A national brand that welcomes tourism, attracts new visitors to take a unique look at everything Kazakhstan has to offer for international visitors and tourists.

There are key concepts that may be taken into account in framework for the National Branding strategy.

  • Stability. The concept of ‘stability’ - key strength of Kazakhstan. Kazakhstan is a stable country politically, economically and socially. This is very important due to the fact that investors do not like uncertainty.
  • Resources. Natural resources (i.e. coal, oil, copper, iron, gold, manganese, lead, zinc)– are Kazakhstan’s main strengths.
  • Natural beauty. The vast natural beauty of Kazakhstan is one of the key strengths. The following elements of natural beauty aspects can be

highlighted:

Wildlife - horses, eagles and other wild animals. It can be stated that the eagle symbolizes the notion that Kazakhstan is large, welcoming and free.

Tulips - tulips came from Kazakhstan and it is disappointing fact that this is not very widely known or recognized. Majority of people around the World know that tulip is from the Netherlands due to their marketing and branding efforts.

Terrain - wide steppes and large mountains are a very strong point and unique selling point of Kazakhstan’s natural beauty.

The natural heritage of Kazakhstan – is strength in the context of tourism development of this area.

  • Weaknesses. The weaknesses can be categories as follows:

1. Perception and awareness weakness (lack of knowledge, awareness, brand recognition);

2. Structural weaknesses (infrastructure gaps in some regions).

The development of a new national brand is aimed at resolving issues related to weaknesses in the perception of Kazakhstan such as the lack of awareness of the strengths of Kazakhstan in the international community.

Identified structural weaknesses require the strong involvement of the government, where it would address the long-term conceptually oriented efforts. Structural weaknesses that Kazakhstan faces (which cannot be changed) – issues with infrastructure - but alternative ways of improvement can be found and developed.

Logistics

In a contemporary era of digitalization and economy of globalization logistics is essential sector in further development of a certain country. “World market for transport logistics is estimated at $ 2.7 trillion or about 7% of World GdP”, which shows that it is a very profitable and important area [2]. Also, it is a significant source of national income. Hence, the challenges concerning the development of logistics are regarded as one of the priorities of the government and its development of possible strategies to further improve this sector in the past decade. It can be argued that Kazakhstan has a solid basis for the development of the logistics sector in the region. She is located in strategic position neighboring Russia, China and Central Asian countries and connecting it with Europe, which allows it to be a transit between its neighbors. Moreover, location aspect may be regarded as the crucial catalyst for further improvement of the country's transport and logistics sector. Kazakhstan is a significant “transit hub for oil and natural gas flows between Russia, China, Turkmenistan, Uzbekistan [and] Kyrgyzstan” [3]. Taking into account the importance of the country in Asian region stimulates further progress of logistics and transport sector. At the Foreign Investors Council meeting in 2019, it was mentioned that Kazakhstan can be regarded as a bridge between Asia and Europe as a result the government aims to be one of the largest and most important logistics hub in the Asian region [2].

   

2014

2016

2018

Indicator

 

88

77

71

LPI

 

2.70

2.75

2.81

Score

rank

106

65

81

Quality of trade & transport infrastructure

score

2.38

2.76

2.55

Table 1. LPI index Kazakhstan [4]; [5]; [6].

Kazakhstan ranked at 133 position in LPI in 2007, with the great improvement in 2018 Kazakhstan holds 71 position (please refer to table 1 above for 2018 data). In comparison none of the CIS and Central Asian countries has achieved such success, to exemplify, Russia holds 75 position, Belarus is at 103 position and Kyrgyzstan is ranked 108 [3].

The strategic location of Kazakhstan between the important routes of - China and Europe – may be regarded as the crucial stimulus for further improvement of the country's transport and logistics system. The development of the efficient logistics routes is mainly encouraged by the fact that “main areas of development of China's economy are the western and central provinces” that are closely located to rail transport through its neighbor- the Republic of Kazakhstan [2].

Investments

Kazakhstan is trying different approach to engage with investors of different countries. For example, it became a member of Eurasian Economic Union, a free-trade bloc that includes Russia, Belarus and Kazakhstan with the follow up joining of Armenia and Kyrgyzstan a couple of years ago. Another approach is visa incentives that allows 44 countries citizens to enter the territory of Kazakhstan for up to 30 days with all types of valid passports [12]. In the contemporary time, these are significant steps in attracting not only tourists but also potential businesses and, consequently, more investments. More to the point, these factors combined with the fact that Kazakhstan joined World Trade Organization (hereafter WTO) in 2015 show how fast, compared to its neighbors, the country is growing, modernizing and successfully collaborating with various countries and International Organizations [11]. Kazakhstan, surely, has a great economic environment and potential for further progress of its national image. According to the Bloom Consulting and its Country brand ranking report Republic of Kazakhstan holds 14th position among countries in Asian region in 2020 [7].

Kazakhstan is implementing different government programmes in order to develop certain sectors more, attract investments to particular projects that would result in the higher employment rate. For example, Business Roadmap 2025 is aiming to increase the share of small- medium enterprises (hereafter SME) by 35 percent [8]. This government initiative is focused on making available the employment positions and keep a sustainable growth of regional entrepreneurship. More to the point the Business Roadmap 2025 is concentrated on the increase in tax revenues by about 2 times from the level of 2017, increasing the share of medium-sized businesses to at least 13.7 % [8].

Another highlight that create a foundation for attracting FdI is special economic zones (hereafter SEZ). There are special rules that operate on the territory of SEZ, this is an opportunity for investors to freely work in Kazakhstan. For example, according to PWC there are tax incentives, which allow to easily work on the territory of SEZ projects [9]:

  • CIT: 100% reduction (certain conditions).
  • VAT: 0% rate (for goods fully consumed during the performance of activities corresponding to purposes of creation of the SEZ and included in the list of goods established by the government of Kazakhstan).
  • Land tax and payment for the use of land plots: 0% rate.
  • Property tax: 0% rate.
  • Social tax: 100% reduction (for 'Park of Innovative Technologies').

There are 12 SEZ projects that currently operate in various regions of Kazakhstan [9]:

  1. 'Astana, the New City' in Nur-Sultan (the expiry date is in 2027).
  2. ‘Astana Technopolis’ in Nur-Sultan (the expiry date is in 2042)
  3. 'Aktau Sea Port' in Aktau (the expiry date is on 1 January 2028).
  4. 'Ontustik' in Sairam district of South-Kazakhstan region (the expiry date is on 1 July 2030).
  5. 'National Industrial Petrochemical Park' in Atyrau region (31 december 2032).
  6. 'Park of Innovative Technologies' (1 January 2028).
  7. ‘Saryarka’ in Karaganda region (1 december 2036).
  8. ‘Khorgos - the eastern gates’ in Almaty region (2035).
  9. ‘Pavlodar’ in Pavlodar (1 december 2036).
  10. ’Chemical Park Taraz’ in Taraz (1 January 2037).
  11. ‘International Center for Cross-Border Cooperation Horgos' in Almaty region (1 January 2041).
  12. 'Turkestan' in Turkestan region (1 January 2043).

In order for Kazakhstan to be technologically advanced following steps need to be fulfilled. The use of technology parks, social-entrepreneurial corporations (hereafter SEC) and regional branches of national companies are essential for the country. Kazakhstan’s government uses two-tier system of technology parks - National S&T parks and Regional Technology parks [10]. In particular the national industrial parks emphasized on new industries that would create basis for competitiveness and development of country’s economy. The national technological and scientific parks include: Park of Innovative Technologies (Techgarden, Astana Innovation hub), the National Industrial Petrochemical Technology Park (Atyrau), Park of Nuclear Technologies (East Kazakhstan) [10]. The regional and scientific parks are crucial part of development of an academic, technological and scientific area in Kazakhstan. More to the point it would allow to further improve the innovation sector in the country. The majority of regional and scientific parks located in big cities such as NurSultan and Almaty, for instance regarding the new project applications about “85% are submitted from Almaty” and Central areas of Kazakhstan, which depicts that regions needs to be more up to date with central regions [10]. This leads to the argument that the development of only central cities is not enough for further growth at a government scale.

Conclusion

An effective creation of the brand image is mostly based on successful use of appropriate marketing and communications strategies. Marketing strategies are significant tools in the creation and maintaining of the brand and its image through the appropriate positioning of the said brand. In other words, identifying strengths, weaknesses, opportunities and threats of the certain brand and developing an effective marketing strategy that is able to support, develop and maintain the brand is what any communications team strives for. Communication is essential in the development and promotion of the brand, i.e. ensuring that the brand image is interpreted correctly (as was programmed in the strategy) and the marketing strategy reaches its target audience. There are various communication strategies that may help to create, maintain a develop the successful brand image. In our days the digital economy of the contemporary time allows the use of social networks and media in order to build a perfect foundation for the leading brand image, and in our days the social media and platforms are the perfect tools that let you reach the target audience instantly and at mass and communicate your main message easily.

 

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Year: 2020
City: Almaty