Kazakhstan: New Year’s Immigration Reforms Bring Mixed Impact
A series of major immigration forms are set to take effect on 1 January in Kazakhstan as the country moves towards more international openness in an attempt to recapture its previously strong economic growth.
In a series of major immigration reforms slated to take effect 1 January, Kazakhstan moves toward more international openness to recapture its previously strong economic growth. Although these changes will provide overall benefits to international business in this Eurasian nation, the rules will also present new challenges to Kazakh sponsoring companies.
Growth and opportunities in Kazakhstan
With a land-mass the size of western Europe, a population comparable to that of the Netherlands, and being land-locked between two powerful neighbours – Russia and China – Kazakhstan remains somewhat of an enigma in international business. It would surprise many to learn that the former Soviet Union member has quietly become the dominant economy in the central Asian region, with average GDP growth of 8 per cent during the 2000s, due in large part to its position as a top-ten oil producer and the world’s top uranium producer. While many of Kazakhstan’s citizens are still employed in lower-paid agricultural jobs, they have enjoyed a significant overall rise in standard of living. The United Nations’ Human Development Index now puts Kazakhstan at par with its nearby neighbours in Eastern Europe.According to the World Bank, Kazakhstan’s people transitioned from “lower-middle-income” to “upper-middle-income” in less than 20 years, with a corresponding sharp decrease in poverty rates over the same period. However, as the economy naturally matured and global oil prices fell, the gains have slowed in recent years to almost zero growth in 2016.
In order to escape this economic plateau, the next challenge for the government – led by the country’s authoritarian President Nursultan Nazarbayev – is to move from an agricultural and raw materials economy to a more balanced, global economy. While still sharply criticized for human rights abuses and corruption, President Nazarbayev’s government has managed to score 50th place on the World Economic Forum’s Global Competitiveness Report, through a mix of stable fiscal and monetary policy and an investment-friendly tax code. Next on the agenda for the economy appears significant corporate immigration reform. The changes coming next year follow a similar round of immigration improvements in 2014.
What’s changed – visa-free regime expanded
Effective 1 January, pending the certain signature of Prime Minister Sagintayev, Kazakhstan will greatly expand its visa-free regime. Under Resolution 459, the number of countries whose nationals will be welcomed to the country visa-free will increase from 19 to 39 nations, and the duration of permissible stay will increase from 15 to 30 days. The 39 nations whose citizens are eligible for visa-free entry into Kazakhstan include most of Europe, the United States, Canada, Australia, Japan, and South Korea.The visa-free scheme is open to business and tourist travellers and Kazakhstan looks forward to the prospects of increased traffic in both sectors. This expansion is motivated, in part, by Kazakhstan’s 2017 hosting of two significant international events: the 80-nation EXPO-2017 world fair on energy innovation to be held in Astana, and the International University Sports Federation’s Winter Universiade in Almaty.
What’s changed – revision of work permit scheme
In a separate enactment, also effective 1 January, Kazakhstan will make extensive changes to its work permit rules in an attempt to make them more foreign-worker-friendly. Generally, reaction to the new rules has been favourable; however, many legal observers are quick to point out significant discrepancies and ambiguities in how the new law harmonises with other current statutes.The long-anticipated Order 559 simplifies the previous employment-based immigration scheme into two streams of work permit types: (1) Work Permits for attracting foreign labour force, the so-called “General Regime;” and (2) Work Permits under “Inter-Corporate Transfers.” Unlike the current scheme, the new rules do not contain an extensive list of exemptions. Rather, limited exemptions will be provided under a separate Law on Occupancy of Population, which also comes into force on 1 January.As originally drafted, the new rules do not expressly provide an automatic exemption for foreign heads of local branches and representative offices, as is the current practice. This omission introduces significant uncertainty for companies going forward as to whether their top foreign managers should now immediately apply for work permits and prompted vigorous discussions between law makers and business organizations in the several weeks since the Order appeared on the government’s official online legal register.As of the time of our writing, the government has reportedly relented and will allow the current exemption for foreign heads of local branches and representative offices to remain. However, some media outlets continue to report the elimination of the exemption. Pro-Link GLOBAL is continuing to monitor the situation and will report on any changes or official announcements regarding this provision.
The General Regime will encompass the majority of foreign nationals working in the country, namely those employed directly by a company in Kazakhstan. While the changes are extensive, the most significant changes are as follows:
- Elimination of the local labour market search requirement. Companies no longer need to conduct a search for local candidates prior to applying for a work permit to hire a foreign national
- Elimination of the requirement of “special conditions.” Companies will no longer be required to perform additional measures, such as the training and development of local personnel, creation of other positions for local employees, etc.
- Decrease in the duration of Work Permit validity issued in the First Category (directors and deputy directors) from three-years to 12-months. However, First Category Work Permits may be renewed annually, with no limit on number of extensions
- Increase in the number of allowable extensions for Work Permits issued in the Second and Third Categories (specialists and highly-qualified personnel) from two to three extensions. Second and Third Category Work Permits will be issued with 12-month durations, with the possibility of three annual extensions
- Elimination of the “departure guarantee” document and fee deposit requirement to guarantee the foreign worker’s departure at the expiration of the work permit
- Imposition of a new government fee for initial issuance or extension of Work Permits. The amount of the new fee will be determined on a matrix of the Work Permit Category and the industry or type of economic activity. The fee amount ranges from KZT 310,853 to KZT 567,250 (currently approximately USD 926 to USD 1,690)
- Decrease in the processing time for Work Permit applications from 15 business days to 7 business days
A major aspect of the previous scheme that has not changed is the foreign-to-local employee ratio, which will still apply to the General Regime. The percentages remain at 70 per cent of local workforce for the First and Second categories and 90 per cent of local workforce for the Third and Fourth Categories.However, in a major positive change for companies, the new rules exempt foreign employees from Eurasian Economic Union nations for purposes of calculating the foreign employee ratio. Employees who are nationals of Russia, Belarus, Armenia, and the Kyrgyz Republic will be counted as local employees in calculating the foreign-to-local ratio.
Inter-Corporate Transfer Regime
The Inter-Corporate Transfer (ICT) Regime will govern those foreign nationals assigned by their foreign employers for work at affiliated companies or branches in Kazakhstan. Again, the changes are extensive for this immigration stream, but the most significant differences are as follows:
- Clarification of the procedure for the local labour market search
Companies will continue to be required to conduct a search for local candidates prior to applying for a work permit for an ICT foreign national, but more specific guidance on meeting this requirement should make the process easier and more predictable. Guidance issued thus far includes requiring advertisements to be posted for at least 30 days in republican and local periodicals, employment web sites, and with the local Employment Centre.Adverts must be posted in both the Russian and Kazakh languages;
- Letters or documents of assignment will be accepted as proof of the ICT assignment, whereas previously only a formal employment agreement was accepted
- Imposition of a new Kazakh language requirement. ICT employees will now be required to pass an exam showing an elementary level knowledge of the Kazakh language
- Imposition of a requirement that foreign managers and specialists may not exceed 50 per cent of the local employees of the same level
How these changes affect you
The various immigration reforms which take effect on 1 January present a mix of opportunities and challenges for companies doing business in Kazakhstan. The simplification of the employment-based immigration streams, their requirements, and application processing – particularly, the removal of labour market testing and special conditions for the General Regime – are major improvements which will benefit companies with foreign national employees.Further, the expanded business visa-free opportunities with longer permissible stays will reduce transaction costs of doing business in Kazakhstan. However, the addition of a local language requirement for ICTs, the new fairly-significant government fees under the General Regime, and some of the latent ambiguity in the language of the new rules, blunt some of the positive changes.At Pro-Link GLOBAL, we applaud the increasing openness to the global market that Kazakhstan is showing and support these predominantly positive immigration reforms. However, we look forward to subsequent government announcements to refine and clarify some of the changes. In the interim, for companies who believe they may be affected by the above discussed changes, we encourage them to reach out to their Pro-Link GLOBAL Immigration Specialist for assistance in navigating this period of transition and continue reading our Immigration Dispatches for updates on the developing international business climate in Kazakhstan.