Localisation in Kazakhstan – the facts

Posted on: 13/04/2015 in: Export, New markets, Opportunities for SMEs

What is localisation? What does local content mean and how do we comply with the rules? These are questions all potential exporters need to know the answers to if considering exports to Kazakhstan, especially if they are to succeed! In this week’s blog, we’re explaining what it’s all about…

Where contracts become available for tender in Kazakhstan, the systems in place determine that preference should be given to those who offer the most Kazakh involvement. Depending on the type of contract and where it is, different percentages may apply, but essentially, the Kazakh authorities are looking to secure as much Kazakh content as possible. This can be by way of employment, the amount spent in Kazakhstan on wages, or on suppliers or materials. The government are also keen to encourage Kazakh ownership, in the form of shareholding. In other words, if a company bidding for a contract is controlled by Kazakhs with a shareholding of over 50%, then that company will be preferred in the contract race. The more Kazakh content, the better.

This is a long established principle and although it was initially focused on labour, over the past few years, it has been extended to cover services and more recently has moved more towards share ownership. Essentially and perhaps not surprisingly, the Kazakh government pushes for more in terms of localisation.

This has placed increased pressure on Western oil companies to use as much Kazakh resource as possible.

Where does this leave UK SMEs looking to export goods or services? Handing over control of half your business is unlikely to be an attractive, let alone realistic proposition, but how otherwise is it possible to secure contracts?

All is not lost – the way we work is that one of our 100% Kazakh contacts secures the contract in Kazakhstan and then sub contracts to a UK SME with the relevant expertise. This way, everything that can be done in Kazakhstan can be fulfilled by Kazakhs – often in Kazakhstan, they can still do the work and source the materials in country.

How can Kazopp help?

One of the biggest issues in Kazakhstan is TRUST and we have the benefit of an established network of trusted people and companies, built up over 20 years. This enables us to keep our ear to the ground and identify quickly when there are opportunities to cover gaps in Kazakh expertise. This is important to Kazakhstan, because they do want foreign companies to come over to introduce new technologies, new ways of working and to train their people, leaving a long term legacy in country.

We currently have several UK SMEs from our supply chain linking up or in more detailed discussions with a 100% Kazakh company and are actively supporting them to win business in Kazakhstan.

Could your SME be next? If you’re interested in discussing the options further, get in touch.