Flow-out of Russian business to Kazakhstan to smooth legislation at low level

Business Materials 7 May 2011 14:20 (UTC +04:00)

Azerbaijan, Baku, May 7 / Trend E. Ostapenko /

The flow-out of Russian business to Kazakhstan will undoubtedly be a push for compromise and smoothing of Russian and Kazakh laws, the experts said. However, whether this will be a progressive action remains a question.

The entrepreneurs in Russia, dissatisfied with the conditions for business development in their country, combat power, a well-known Kazakh economist Magbat Spanov said. Business threatens to go to neighboring Kazakhstan, if it requirements' are not considered.

"Such an action by Russian entrepreneurs, of course, will be the impetus to improve the Russian legislation in the field of entrepreneurship," the head of the Kazakh Institute of Development. Spanov told Trend. "The effect of competition is always positive."

There has been an active trend of registration the companies by Russian entrepreneurs in Kazakhstan for the last month due to some better terms. The head of the Russian Union of Entrepreneurs Alexander Shokhin appealed to Prime Minister Putin with a request to bring the Russian Labor Code in accordance with the Kazakh legislation. Only this measure may prevent the tendency of transiting Russian business to Kazakhstan.

Russia, Kazakhstan and Belarus establish the Customs Union and Common Economic Space in accordance with the agreement in 2007. It provides for free movement of goods, services, capital and labor, coordinated macroeconomic policies.

Russian economist Vasily Koltashov said that a project of the Customs Union is valuable if it involves development, including the unification of legal norms, business and labor environment.

"In these circumstances, it would correct not to adjust to each other, but to immediately create a new legal base of the Union," the head of the Center for Economic Research of the Institute of Globalization and Social Movements Koltashov told Trend. This will remove the shortcomings of all the legal systems of the Customs Union member-states and move the integration process from the customs to the economic level."

However, he thinks that the countries will likely to follow a more complex and long way. Russia will finalize the Labor Code in accordance with the Kazakh model. Kazakhstan will reconsider some legal positions in accordance with a partner's rules. Thus, the Customs Union promises the hired employees smoothing on a low level, rather than the top one.

Kazakhstan rose from 74th place in 2010 to 59th place in 2011 in the World Bank ranking on the favorable conditions of doing business. The index on the number of reforms simplifying doing business hit 4 in 2011.

Russia dropped from 116th place in 2010 to 123rd in 2011 in this rating. The number of reforms on simplifying doing business for 2011 hits two.

The experts stressed an easier procedure for business registration, less stringent taxation, the reduced legislative control of small and medium-sized business, the widespread use of Russian language in the country, cheap labor force, accumulative pension system reducing the costs for companies and and a lack of a strong trade union movement among the objective reasons attracting Russian businessmen to Kazakhstan.

Kazakhstan heads ten countries, where business conditions significantly improved in 2009-2010 in the latest WB's report "Doing Business 2011". Kazakhstan made amendments to the law on companies. The regulations were introduced to simplify the procedures of creating enterprises. The minimum capital standards were reduced up to 100 tenge ($0.70).

The procedure of obtaining the building permits was simplified due to the introduction of new regulations in the construction sphere.

As a result of the reforms, the time needed to carry out export supplies, declined by 8 days and on import purchases - by 9 days. The number of documents required for conducting transactions also decreased by 1 unit.

One can not talk about a massive transfer of Russian business to Kazakhstan, he said.

"The tendency of transferring of Russian business to Kazakhstan has started this year," he said. No radical changes could happen for three months. Even the re-registration of the enterprise in another city and moreover another country is a complicated procedure that requires time."

However, the U.S financial analyst at Alfa Bank in Russia, Jason Hurwitz, thinks that the tendency of flowing-out of the Russian business to Kazakhstan will soon come to naught.

"Any businessman, who sees the benefits for business from its transfer from Russia to Kazakhstan, taking into account the possibilities of the Customs Union, would have re-registered it long ago," Hurwitz, who lived and worked in Kazakhstan for a long time, told Trend. If the entrepreneur has not decided this yet, transferring of the company will not promise great prospects.