4.1 Barriers to investment in mining

According to Kazakhstan's new Mining Law revised in 2005, when a company applies for the license of concessions regarding its mining rights or to sell its shares, Kazakhstan's Ministry of Energy and Mineral Resources has the right not to issue the license. Meanwhile, the state has preemptive rights to purchase the mining rights or shares of not only a mining company, but also companies which have direct or indirect decisive power over the mining company. This regulation has constituted substantial obstacles for foreign investors to entering or withdrawing from Kazakhstan's mining sector, especially to the acquisition of Kazakhstan's domestic mining companies. The Chinese side is greatly concerned over the issue.

Kazakhstan's new Mining Law also states that mining fees are charged on the basis of floating rates, which increase proportionally with the increase of the annual mining volume. Additionally, in Kazakhstan's new Tax Code, the excess profit tax rate has been increased from 4 percent-30 percent to 15 percent-60 percent. Many foreign investors complain that these new regulations have made the situation of underground-resources miners more difficult, increased investors' burden of taxes and fees and reduced their rate of return. Kazakhstan has also passed a new Law on Productio n Sharing Agreements for the Purpose of Offshore Oil Operations (PSAs). According to PSAs, when a foreign investor exploits offshore oil in Kazakhstan, the minimum state share of the project's profit is 10 percent before the investment is recouped, and 40 percent after the investment is recouped. It normally takes 25 or 30 years to recoup the investment.

4.2 Barriers to investment in land

Kazakhstan's 2003 Land Code provides that a Kazakhstani citizen can privately own land for farming, industrial, commercial and residential purposes, but a foreign national and enterprise can only rent land for farming purpose with a lease of up to 10 years.

4.3 Labor permit

Kazakhstan requires that a foreign employee working in Kazakhstan apply for a labor permit, which still remains one of the main obstacles hampering foreign investment. In 2001, Kazakhstan established a system limiting the number of labor permits issued to foreign personnel. The system sets quotas on labor permits on the basis of the total number of labor force of the country annually. Many companies investing in Kazakhstan complain that the Kazakhstani government often denies the visa applications of company managers and technicians without sound justification, or provides them with only a short-term stay. This regulation has had a negative effect on the production and management of foreign-funded enterprises.