Analytics

The special economic zones in the chemical industry of Kazakhstan

In Kazakhstan the Lisakovskaya (CLstanaiskaya oblast), Zhairem-Atasuyskaya (Dzhezkazganskaya oblast), AlaCLlskaya, and Zharkentskaya (Taldykorganskaya oblast) zones and the free trade zone "Atakent" (city of Alma-Ata) appeared in 1991 as the first special economic zone (SEZ).

However, due to the imperfection of the legal and organizational aspects of the operation of special economic zones, their activity was ineffective and therefore they had been later abolished.

Currently in Kazakhstan the social relations arising from the creation, operation and abolition of special economic zones are regulated by the Law of the Republic of Kazakhstan "On special economic zones in the Republic of Kazakhstan"[1].

According to this law, the special economic zones are established to accelerate the development of modern high-performance, competitive industries, attract investments and new technologies to the sectors of the economy and the regions, and also to increase the employment rate, and these zones represent a limited territory of the Republic of Kazakhstan with a special legal regime.

A proposal to establish a special economic zone shall be submitted by central or local executive bodies, legal entities interested in the creation of a special economic zone, to a competent authority (at present time, it is the Ministry of Industry and New Technologies of Kazakhstan), including the concept of a special economic zone presented in line with the requirements approved by the Government of the Republic of Kazakhstan.

The competent authority has the right to reject the proposal on the establishment of a special economic zone in the following cases:

  • inexpedience of the establishment of the special economic zone;
  • inconsistency of the proposal on the establishment of a special economic zone with the state economic policy priorities;
  • incompleteness or inaccuracy of the submitted materials;
  • inconsistency of the proposal with the environmental protection requirements;
  • the necessity of protection of the specially protected areas and life and health of people, and the threat of destruction and damage to the objects of historical and cultural heritage and to the ensuring of national security.

However, the rejection of the proposal to establish a special economic zone shall not be an obstacle for re-application with another proposal on its establishment.

Should the authorized body approve of the expediency of establishing a special economic zone, the persons who have made the proposal on its creation, shall provide the feasibility study report of the special economic zone being created including the environmental impact assessment, within six months since the date of receipt of notification. Besides, the feasibility report should contain projections of financial and economic and social implications, rationale, expediency and assessment of the outcome of the creation of a special economic zone.

The competent authority, after receiving the positive findings from the concerned government authorities, shall put forward the proposal to establish a special economic zone including the concept of a special economic zones, the feasibility report and the environmental impact assessment to the Government of the Republic of Kazakhstan within sixty calendar days.

Decisions on the creation of a special economic zone and its priority activities, consistent with the objectives of its creation, are made by the President of the Republic of Kazakhstan on advice by the Government of the Republic of Kazakhstan.

Regulations on a special economic zone, target indicators of functioning of a special economic zone, the critical level of failure to reach the target indicators, are also approved by the President of the Republic of Kazakhstan.

For members of all special economic zones, the following privileges are reserved:

  • exemption from corporate income tax;
  • exemption from land tax;
  • exemption from property tax;
  • sale in the special economic zone of goods wholly consumed in activities that comply with the purposes of creating the special economic zones, according to the list of goods approved by the Government of the Republic of Kazakhstan, it is taxed on zero rate of value added tax.

Other perks:

  • issuance of permits for attraction of foreign labor by the local executive bodies in accordance with the Kazakhstani legislation, but in a simplified procedure without seeking nominations in the domestic labor market;
  • provision of land for free for the project implementation for the period of up to 10 years.

There are additional tax benefits for the participants of SEZ "Park of innovative technologies" and SEZ "Astana – a new city."

Eligibility conditions for the tax benefits:

  • registration as a taxpayer in the special economic zone;
  • no structural units outside the special economic zone;
  • not less than 90% of the total annual income (for the SEZ "Park of innovative technologies" - 70%) must be comprised by the income from the sale of own produced goods complying with the priority activities of the special economic zone.

Currently, the Decrees of the President of the Republic of Kazakhstan have created ten special economic zones (Fig.).

Fig. The operating special economic zones in Kazakhstan

Of 10 special economic zones created in Kazakhstan, three zones - SEZ "National Industrial Petrochemical Park", SEZ "Pavlodar" and SEZ "Chemical Park Taraz" have as priority activities the creation and development of chemical and petrochemical plants (Table 1) [2-4].

Table 1. Summary of special economic zones in the chemical industry

Indicator SEZ "National Industrial Petrochemical Technopark" SEZ "Pavlodar" SEZ "Chemical Park Taraz"
Location Atyrau oblast * Northern industrial area of Pavlodar city ** Shu district of Zhambyl oblast ***
Year of creation 2007 2011 2012
Operation period until December 31, 2032 until December 1, 2036 until January 1, 2037
Area occupied 3475.9 ha 3300 ha 505 ha
Priority activities
  1. Production of chemicals;
  2. Production of petrochemicals;
  3. construction and commissioning of facilities designed specifically for the implementation of activities referred to in subparagraphs 1) and 2) of this paragraph within the design and estimates documentation, provided there are the positive findings of the authorized body responsible for the state regulation of the establishment and functioning of special economic zones, on that the construction project meets the objectives of creating a special economic zone.
  1. Production of chemical products;
  2. Production of petrochemicals and products of related productions and technologies.
  1. Production of chemicals;
  2. Production of rubber and plastic products;
  3. Production of other non-metallic mineral products;
  4. Manufacture of machinery and equipment for chemical industry;
  5. Construction, in accordance with the design and estimate documentation and commissioning by an act of acceptance of the state acceptance commission, of the industrial facilities designed specifically for the production of chemical products, rubber and plastic products, as well as other non-metallic mineral products, machinery and equipment for chemical productions.

Note:

- the SEZ "National Industrial Petrochemical Technopark" is located in Atyrau oblast on several sites, in particular, the construction of a petrochemical complex to produce polyethylene and polypropylene is planned to be done on the site, located in the vicinity of the Karabatan station. The site located in the industrial zone of the city of Atyrau, behind the location of the Atyrau oil processing plant, will be home for the technopark with area of 285 ha;

** - the SEZ "Pavlodar" is located in Pavlodar oblast on the conserved areas of the "Caustic" LLP;

*** - the SEZ "Chemical Park Taraz" located in Zhambyl oblast in 15 km from the town of Shu.

Special Economic Zone "National Industrial Petrochemical TechnoPark."

According to the Decree of the President of the Republic of Kazakhstan № 495 as of December 19, 2007 "On the establishment of the special economic zone "National Petrochemical Industrial Park", this SEZ is created for the following purposes:

1) The development and implementation of breakthrough investment projects for the creation and development of petrochemical industries of the world-class level on the deep processing of hydrocarbon raw materials and production of the wide range of competitive petrochemical products with high added value;

2) attracting of investments in the construction and integrated development of petrochemical plants on the basis of mechanisms of partnerships between state and private business;

3) construction of new interconnected, highly efficient and innovative petrochemical industries;

4) integration of the Kazakh petrochemical products in the world system of production and distribution, creation of an innovative, competitive domestically produced petrochemical products in accordance with international standards (ISO);

5) The development and implementation of research and scientific and technological innovation projects for the creation and improvement of petrochemical productions and technologies on cleaning, deep processing of hydrocarbon raw materials;

6) training and retraining of personnel for petrochemical plants in accordance with international standards.

The implementation of investment projects to create new petrochemical plants on the territory of SEZ "National Petrochemical Industrial Park" involves two stages.

The first stage of SEZ development involves the production of basic petrochemical products, which in turn should become the supply for the production of petrochemical products of higher added value. With this purpose in mind, currently the construction of the integrated gas chemical complex on production of ethane, ethylene, polyethylene, propylene, polypropylene in the territory of SEZ, initially with the use of raw materials of the Tengiz GPP and then using natural resources of Kashagan and Karachaganak. [5]

The second stage of SEZ development involves the construction of the industrial petrochemical technopark focused on the production of innovative products with high added value (synthetic rubbers, fibers, resins, new composite materials, etc.) with the use of the first phase feedstock.

The Petrochemical Industrial Technopark involves placing of the following industries: manufacturing of polymer products with special properties, of polymer films for the packaging industry, plastic powders for coating metals, composite materials and modifiers for plastics processing; recycling of pure plastic waste and substandard products of the petrochemical complex, etc.

Currently, three major projects are being implemented in the territory of SEZ: on the production of road bitumen at the Aktau plant of plastics (500 thousand tons of bitumen per year), on the construction of a complex for the production of aromatic hydrocarbons at the Atyrau oil processing plant (133 thousand tons of benzene and 496 thousand tons of paraxylene per year), as well as on the construction of the integrated gas chemical complex in Atyrau oblast (500 thousand tons of polypropylene per year and 800 thousand tons of ethylene per year [5].

Currently, the project "Production of paving bitumen at the Aktau plastics plant" is on the final stage. In particular, the necessary equipment - columns, furnaces, pumps, heat exchangers, the main part of bulk capacitance and separating equipment, and also air coolers and others – has already been delivered to the construction site. The commissioning of the bitumen production is scheduled for 2013.

On the construction sites of the aromatics production complex at the Atyrau oil refinery plant the work is currently in progress, such as pile-driving, laying of foundation, waterproofing of foundations, etc. The commissioning of the aromatics production complex is scheduled for 2014.

Construction of the integrated gas chemical complex in Atyrau oblast includes two phases. The first phase - the creation of polypropylene production, the second phase - of polyethylene production. Currently, the first phase includes the design of basic processing units, internal networks and infrastructure items. Putting into operation of the first phase of the integrated gas chemical complex is scheduled for 2015, the second phase – for 2016.

According to the target indicators in the Presidential Decree of Kazakhstan #495 as of December 19, 2007 "On the establishment of a special economic zone "National Petrochemical Industrial Park", the creation of this SEZ will allow to increase the total volume of investment in the industry to 945 billion tenge and produce products for the amount of 297.1 billion tenge by 2017, and respectively 950 and 1 369.1 billion tenge by 2022, and 955 and 1 784, 1 billion tenge by 2027, and 960 and 1 878, 5 billion tenge by 2032 (Table 2).

Table 2. Target indicators of functioning of the special economic zone "National Industrial Petrochemical Technopark" and the critical level of failure to reach target indicators

Indicator Units of measurement Achievement by 2017 Achievement by 2022 Achievement by 2027 Achievement by 2032
TI * CL ** TI *> CL ** TI * CL ** TI * CL **
Total volume of investments Bln. tenge 945 472 950 475 955 478 960 481
including:
Volume of foreign investments Bln. tenge 96,8 48 97,8 49 98,8 50 99,8 51
volume of domestic investments Bln. tenge 848,3 424 852,3 426 856,3 428 860,3 430
Production of goods and services (works) in the territory of SEZ Bln. 297,1 148,6 1 369,1 684,6 1 784,1 892,1 1 878,5 939,3
Number of participants u 8 6 13 18 18 11 23 14
Number of persons engaged in supplementary activities man 15 7 30 15 45 20 60 30
Number of jobs created in the territory of SEZ u 440 220 490 245 540 270 590 295
Percentage of local % 30 15 40 20 50 25 60 30

Note:

TI * - target indicator;

CL ** - critical level.

Thus, as can be seen from the table, it is expected that the number of companies that will carry out the production activities in the territory of SEZ will increase from eight (in 2017) to twenty-three (2032). Moreover, in the period from 2017 to 2032 the increase on other indicators is expected.

The Special Economic Zone "Pavlodar".

According to the Decree of the President of the Republic of Kazakhstan №186 as of November 29, 2011 "On the creation of the special economic zone "Pavlodar", this SEZ is created for the following purposes:

1) development of chemical and petrochemical industries, in particular, the production of export products with high added value, with the use of high-tech modern environmentally sound technologies;

2) development and implementation of breakthrough investment projects for the creation and development of petrochemical industries of the world-class level on the deep processing of hydrocarbon raw materials and production of the wide range of competitive petrochemical products with high added value;

3) integration of the Kazakh petrochemical products in the world system of production and distribution, creation of an innovative, competitive domestically produced petrochemical products in accordance with international standards;

4) creation of highly efficient and innovative productions of chemical and petrochemical industry, including high-tech and competitive industries, development of new products;

5) creation of a favorable investment climate and attracting of local and foreign investments in the implementation of investment projects and integrated development of chemical and petrochemical industries on the basis of mechanisms of partnerships between state and private business;

6) accelerated development of the region to strengthen the entering of the republic's economy into the global economic system;

7) introduction of modern management methods and management;

8) solution of social problems, increasing of the employment rate.

According to the project, the construction of infrastructure on the territory of the SEZ "Pavlodar" will begin in the second half of 2013 and shall be completed in three years. The infrastructure will include customs posts, the objects of social and communal purposes, water supply, drainage, heating, electricity, waste storage, roads and sidewalks with paved area of 1.6 hectares, railways with length of 5.7 km [6].

More than 20 new enterprises are planned to be created in the territory of SEZ, including production of aluminum oxychloride, calcium hypochlorite, trichloride and phosphorus pentasulfide, inhibitors, polyvinyl chloride, chlorinated paraffin solid, etc., and these productions will be using the local raw materials. The capacity of plants for the production of each of these chemicals in the average will be ranging from 12 to 80 tons per year [6].

According to the target indicators of the Decree of the President of Kazakhstan №186 as of November 29, 2011 "On the creation of the special economic zone "Pavlodar", the creation of the SEZ will allow to increase the total investments in the industry to 67.4 billion tenge by 2015 and produce products worth 5 billion tenge. However, in subsequent years, despite the fact that over the regular periods of time investments will be as much as 257.3 billion tenge each time, the payback on them will be 413.2 billion tenge by 2020, 1042.4 billion tenge – by 2025, 1071.2 billion tenge – by 2030, and 2 551.8 billion tenge – by 2037 (Table 3).

Table 3. Target indicators of functioning of the Special economic zone "Pavlodar" and the critical level of failure to reach the target indicators

Indicator Units of measurement Achievement by 2015, including Achievement by 2020, including Achievement by 2025, including Achievement by 2030, including Achievement by 2037, including
TI * CL ** TI * CL ** TI * CL ** TI * CL ** TI * CL **
Total volume of Bln. tenge 67,4 6 257,3 25 257,3 25 257,3 25 257,3 25
including:
the volume of foreign investments Bln. tenge 12,5 1,3 49,5 5 49,5 5 49,5 5 49,5 5
volume of domestic investment bln. tenge 54,9 5 207,8 20,2 207,8 20,2 207,8 20,2 207,8 20,2
The volume of production of goods and services (works) on the territory of SEZ bln. tenge 5 1 413,2 41 1042,4 104 1071,2 130 2 551,8 130
Annual growth of investments in the manufacturing industry in the region % 5 3 7 5 7 5 10 7 10 7
Number of participants u 5 3 8 5 8 5 8 5 8 5
Number of jobs opened on the territory of SEZ u 500 200 1000 450 1500 750 1885 1000 1885 1250
The percentage of local content in the total production on the territory of SEZ % 50 30 65 50 70 60 75 65 80 65
The share of export products in total production on the territory of SEZ % 10 5 20 10 30 20 40 30 50 40
Increase in productivity times 1,5 1,2 1,7 1,5 1,9 1,7 2 1,9 2,5 2

Note:

TI * - target indicator;

CL ** - critical level.

As can seen from the table,

Thus, as can be seen from the table, despite a slight increase from 2015 to 2037 of the number of companies that will carry out the production activities on the territory of SEZ (from five to eight), the number of jobs created will increase from 500 to 1885, which will undoubtedly have an impact on reducing the unemployment rate among chemists in the region. Moreover, in the period from 2015 to 2037 the increase is expected on other target indicators as well, in particular, it is planned that the share of exports in the total production on the territory of SEZ will increase from 10% to 50%.

The Special Economic Zone "Chemical Park Taraz"

According to the Decree of the President of the Republic of Kazakhstan № 426 as of November 13, 2012 "On the creation of the special economic zone "Chemical Park "Taraz", this SEZ is created in order to form new types of chemical products on the basis of high-performance technologies in the Republic of Kazakhstan.

The priority activities on the territory of SEZ are:

1) Products of the chemical industry;

2) production of rubber and plastic products;

3) production of other non-metallic mineral products;

4) production of machines and equipment for the chemical industry;

5) construction of industrial facilities designed specifically for the production of chemical products, rubber and plastic products, as well as other non-metallic mineral products, machinery and equipment for the purposes of chemical production, in accordance with the design and estimate documentation, and commissioning on the basis of an act of acceptance of the state acceptance commission.

Despite the fact that the Decree of the President of Republic of Kazakhstan on the establishment of SEZ was issued in late 2012, much of preliminary work has already been done by now. In particular, a feasibility study for the establishment of SEZ has been developed. To ensure the allocation of land to accommodate the special economic zone "Chemical Park Taraz" in Shu district of Zhambyl oblast, the Government of the RoK issued the Regulation #499 as of April 20, 2012 "On the transfer of individual sections of forest land to another land category". The land management projects are developed for land sections for construction of off-site infrastructure networks (road and railway, power lines). Public hearings were held on the preliminary assessment of the impact created by the SEZ to the environment. In addition, a series of meetings were held with potential investors and licensors, with a view of their participation in the creation of chemical production on the territory of SEZ.

According to target indicators of the Decree of the President of Kazakhstan №426 as of November 13, 2012 "On the creation of the special economic zone "Chemical Park "Taraz", the creation of this SEZ allows to attract investments of 82.5 billion tenge by 2015, the total investments should reach 124.5 billion tenge by 2020, and the volume of production - 292.6 billion tenge. It is planned that in spite of the fact that over the five-year time intervals in the period from 2025 to 2037 investments will be attracted as much as 403.5 billion tenge each time, the production of goods and services (works) on the territory of SEZ in 2025 will amount by 2025 to 1561 billion tenge, by 2030 - 2872 billion tenge, by 2037 - 4707 billion tenge (Table 4).

Table 4. Target indicators functioning of special economic zone "Chemical Park Taraz" and the critical level of failure to reach target indicators

Indicator Units of measurement Achievement by 2015, including Achievement by 2020, including Achievement by 2025, including Achievement by 2030, including Achievement by 2037, including
TI * CL ** TI * CL ** TI * CL ** TI * CL ** TI * CL **
Total volume of investments Bln. Tenge 82,5 15 124,5 50 403,5 200 403,5 200 403,5 200
including:
the volume of foreign investments billion tenge 41,2 7,5 62,2 25,0 201,7 100 201,7 100 201,7 100
the volume of foreign investments billion tenge 41,2   7,5   62,2   25,0   201,7 100 201,7 100 201,7 100
volume of domestic investment billion tenge 0,0     0,0     292,6     92,9     1 561 442,3 2 872 856,4 4 707 1 436,3
The volume of production of goods and services (works) on the territory of SEZ % 40     10     152     95     166 136 166 136 166 136
Number of participants u 7 3 15 12 15 13 15 14 15 15
Number of jobs opened on the territory of SEZ u 172   115   1190   819   1430 1001 1430 1001 1430 1001
The percentage of local content in the total production on the territory of SEZ % 0   0   50   30   60 40 70 50 80 60
The share of export products in total production on the territory of SEZ % 0   0   16   8   38 19 45 22 47 24
Increase in productivity times 0   0   1,5   1,3   1,8 1,6 2,0 1,8 2,2 2

Note:

TI * - target indicator;

CL ** - critical level.

In addition, it is assumed that for the period from 2015 to 2037, the number of companies, that will carry out production activities in the territory of SEZ, will increase more than twice (from seven to fourteen) and as a consequence it will lead to increase in number of job openings from 172 to 1430. Given that the South Kazakhstan, which the Jambul region is a part of, has one of the highest unemployment rates in the country, the creation and development of SEZ will undoubtedly have a positive impact on its decline.

Thus, as can be seen from the above data, currently in Kazakhstan, special economic zones are determined to be among the tools for the development of the domestic chemical industry. Given that at the moment mainly only the formation of SEZ infrastructure is being carried out in the country, the effectiveness of this approach can only be assessed when the sites will be operational for the production of chemical products.

REFERENCES

1. The Law of the Republic of Kazakhstan "On special economic zones in the Republic of Kazakhstan", approved by Decree of the President of the Republic of Kazakhstan № 469-IV ZRK as of July 21, 2011.

2. The Decree of the President of the Republic of Kazakhstan № 495 as of December 19, 2007 "On the establishment of the special economic zone "National industrial petrochemical technopark."

3. The Decree of the President of the Republic of Kazakhstan № 186 as of November 29, 2011 "On the establishment of the special economic zone "Pavlodar".

4. The Decree of the President of the Republic of Kazakhstan № 426 as of November 13, 2012 "On the establishment of the special economic zone "Chemical Park" Taraz ".

5. www.atyrau-sez.kz.

6. www.sezpavlodar.kz.

This article was prepared by:

A.A. Meirmanova – PhD in Chemistry, Associate Professor of the Kazakh National Pedagogical University named after Abai

V.P.Dzekunov, PhD in Chemistry, chief manager of the Department of Technical Support of the "United Chemical Company" LLP

The “United Chemical Company” LLP has been conducting research of the chemical industry on an ongoing basis. This section will show the results of such research.


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