RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/ACC/SPEC/KAZ/4/Add.2 
22 September 2000 
 (00-3799) 
Working Party on the 
Accession of Kazakstan Original:   English 
 
 
 
ACCESSION OF KAZAKSTAN 
 
Explanatory Note to the Offer on Tariffs for Goods  
 
Addendum  
 
 The Ministry of the Economy of the Repub lic of Kazakstan has submitted the following 
explanatory note concerning the offer on goo ds which has been reproduced hereunder. 
_______________ 
 
 
 This note explains the formation of the offe r on market access. This paper includes a brief 
analysis of the economic situation in the country in general and a more detailed analysis of the current 
situations in the major economic sectors, as well as the list of the presented offers on binding of 
customs duties in respect of agricultural products and other types of goods. 
 
Offer Formulation  
  The Republic of Kazakstan presents its offe rs on market access for goods in a manner 
consistent with the WTO requirements and divided into two larger groups: 
 
 - Agricultural Products; and  - Other Goods.   The first and the second columns of the subm itted offers are titled as “Codes and Appellations 
of Agricultural Products” and “Other Goods” that in clude 9,864 lines.  The codes and appellations of 
goods correspond with the effective Kazakstani Nomenc lature of Goods involve d in foreign economic 
activities which is based on the Harmonised Syst em of Appellations of Goods and Codes. 
  The third column of the offers titled as the “I nitial Binding Level” lays down the threshold, at 
which the Republic of Kazakstan offers to bind its MFN rates of customs import tariffs from 
1 January the year following the year of accession to the WTO. 
  The fourth column of the offers titled as the “Final Binding Level” lays down the level, at 
which the Republic of Kazakstan offers to bind its MFN rates of customs import tariffs at the end of 
the transition period. 
 
 The fifth column of the offers titled as the “Transitional Period” determines the duration of 
the transition period, in the course of which the initial binding level will be reduced to the final 
binding level.  Agricultural Products
 
 
 At the macroeconomic level, the agricultural sect or is viewed as one of the major industries of 
the economy of Kazakstan with a tremendous pr oduction and export potential.  The destiny of WT/ACC/SPEC/KAZ/4/Add.2 
Page 2  
 
 thousands of enterprises engaged in raw material processing, transportation, warehousing, and sale of 
agricultural products are dependent on the successf ul work of the sector.  The domestic solvent 
demand is to a greater extent generated in the ag ricultural sector and other related sectors. Returns 
received on one Tenge invested in this sector are multifold.  
 Traditionally, Kazakstan was always an agro -industrial country.  The development of new 
virgin lands turned Kazakstan in one of the largest producers of grain and meat in the territory of the 
former Soviet Union.  During the same period of tim e, the industries and produc tions that supplied the 
agricultural sector with necessary products and goods and processed agricultural produce saw a steady 
development.  Such developments resulted in the creation of the objective material prerequisites and 
laid down the groundwork for the formation of the agricultural and industrial complex of Kazakstan 
as a leading part of its economy.   The following was noticed as a result of the undert aken analysis of the current situation in the 
area of production of agricultural products. 
 
 This sector accounted for 34 per cent of th e GDP in 1990 which was the highest among the 
other material industries.  The most advanced we re grain production and cattle breeding.  However, 
its share fell by 2.5 to reach only 8.4 per cent in the total GDP within  the few recent years of reforms 
(see Table 1).  
Table 1:  Dynamics of the Major Indicators of the Agricultural Sector of the 
 
Republic of Kazakstan  
(in %) 
 1991 1993 1995 1996 1997 1998 
Gross agricultural production in 
percent to the annual average for 
1986-1990 104.3 103.9 68.1 61.7 64.2 52.0
Agricultural gross added value in 
per cent to GDP 29.4 16.4 12.3 12.2 11.0 8.4
Workforce engaged in agriculture in 
percent to the total population 
actively engaged in the economy of 
the country 43.6 43.6 44 44 44 44
Production of the major agricultural 
produce items:    
grain in net weight after processing, 
million tons 12 21.6 9.5 11.2 12.3 6.4
cattle and poultry in live weight, 
thousand tons 2,573 2,231 1,774 1,541 1,346 1,206
 
 The cattle livestock was 3,999 heads in 1999 whic h is in line with the same indicator for 
1940, whereas the grain production reached the levels  accomplished in 1958.  All these influenced the 
industrial production:  meat (at th e level of 1946), textile (at the level of 1959), cotton fibre (at the 
level of 1960), cooked meats (at the level of 194 0), mineral fertilizers (at the level of 1950). 
  The export potential of the agricultural sector fe ll significantly.  In 1998, the total export of 
grain was a mere 2.5 million tons, whereas Kazaksta n was able to export from 10 to 12 million tons in 
its best years. 
 
 Accordingly, the revenues of agricultural enterp rises and the rural population contracted.  If in 
1985, the average wage of a rural worker was 91 per cen t of the average wage of an industrial worker, 
it fell to 31 per cent in 1998 to equal 3.8 thousand Te nge per month.  This is practically sufficient for 
only one person to live on.  Whereas the family coeffici ent in the rural areas is 4.2.  The gap between  WT/ACC/SPEC/KAZ/4/Add.2 
 Page 3 
 
 
 income made by the most well-off and the most poor grew from four to eleven times according to the 
official statistics.  If in 1996, the income that fe ll below the living minimum was made by 35 per cent 
of the rural population, it rose to reach 43 per cent in 1999.  At the same time, over 15 per cent of the 
rural workforce is classified unemployed accordi ng to the official statistics.  The issue of 
unemployment is particularly acute in towns and industrial communities, and rural areas where 
enterprises are the major pivots of life. 
  Problems in the agricultural sector produce a certain impact on the development of the 
majority of the other sectors, such as industries, transport, construction and social welfare.  In 
particular, the drop in the industrial production rela ted to the agricultural sector has been observed 
recently to proportionally correlate with the contraction of the agricultural production. 
  The abandoned state of the arable lands, progressi ve aggravation of the epizootic situation in 
the cattle breeding, outdated machinery as well as insolvency of the majority of agricultural 
enterprises caused the Government to annul 50 per cent  of the major debt of agricultural producers in 
the amount of 26.2 billion Tenge for 1996 or US$389.3 million. 
  The aggregate measures used to support the production of grain of cereal crops, potatoes, 
corn, sugar beets, fruit, cattle and sheep breedi ng was 4.0 billion Tenge or US$53.6 million in 1996, 
1997 and 1998.  
 On the whole, the aggregate measures of agricultural support for 1996 were 33845.3 million 
Tenge, for 1997 - 80002. 4 million Tenge, for 199 8 - 95678.2 million Tenge. 
  The decline in the total production of agricultu ral produce and food products in the industrial 
sectors exacerbates and puts at stake the food security of this country.  The total consumption of food 
products reduced twofold within the years of refo rms.  The share of imported food products as known 
officially (butter, margarine, canned meat, cooked meats) exceeds 40-60 per cent in terms of 
consumption.   Low quality remains to be a major problem in the basic processing industries, and low 
solvency demand - in the food industry.  A major im pediment in the area of production of beverages 
and confectionery is sale of illegally importe d and counterfeit products that promote unfair 
competition and undermine the goodwill of the nati onal domestic producers.  The tendencies that 
emerged and were characteristic of the reforms still c ould be observed in the agricultural sector of this 
country in 1998.  
 The decline in the volume of production of all types of products was 18.9 per cent as 
contrasted with the year of 1997, including th e grain production - 48 per cent, cattle and poultry 
slaughtering - 10 per cent, wool - 29 per cent, and potatoes - 14 per cent.   Given budget deficit, the only way to cove r expenditures and spending is to reduce the 
production costs.  The food industry, being one of the end-users’ and having a high rate on capital 
returns, may become a source to revive the economy of this country, create new jobs, transfer of 
capital from trade into industries and,  consequently, into agriculture. 
  Therefore, the current hard situation in the agricultural sector observed at the moment, the 
appearance of the conditions necessary for rehab ilitation of production and its normal operation and 
sustainability, the export potentia l of the agricultural sector and fo rmation of the premises, enabling 
the Republic of Kazakstan to participat e in the world trade system, require: 
  - to ensure the level of sufficient tariff pr otection, particularly in respect of those 
groups of goods that are crucial for the food security of the country and for the 
growth and increase of the efficiency of the agricultural production in this country; WT/ACC/SPEC/KAZ/4/Add.2 
Page 4  
 
  - to use Special Safeguard Measures in resp ect of certain goods of Groups of Goods 02, 
04, 15, 16, 17 in case of necessity in accord ance with Article 5 of the Agricultural 
Agreement; and 
 - to provide for measures of domes tic support and export subsidies. 
 
Other Goods
 
  The costly social and economic system of th e former Soviet Union handed down a chronic 
budgetary deficit that used to be  covered by additional monetary emissions.  Such measures did not 
lead to hyperinflation under the planned system of  pricing; however, now, inflation is coming down 
with all its strength on the existing enterprises, bus inesses and population with price liberalization and 
severance of the former economic ties be ing propitious for such developments. 
  Certain negative phenomena in this economy broa dened the budgetary deficit.  The problem 
of the growing budgetary deficit is  becoming particularly acute unde r the conditions of unfavorable 
competition in the world markets.  This was inherited from the former Soviet division of labor that 
caused the member national economies to become narrowly specialized with this national economy 
specializing in certain types of exported goods, prim arily raw materials.  The geographic location of 
Kazakstan does not provide favorable conditions for keeping certain products competitive.  Therefore, 
the Government is forced to provide tariff holid ays to certain industrial enterprises on railroad and 
other types of transportation to reduce the impact  of transportation costs on the competitiveness of 
domestic products and goods. 
  The economic reforms began in Kazakstan at the time of political instability and economic crises. This resulted in a dramatic decline in the production of goods and services in all sectors of this economy (Table 2). 
 
Table 2:  Dynamics of the Major Indicators in the Republic of Kazakstan
 
 
 1990 1995 1996 1997 1998 
GDP in Real Terms to the 
previous year  x 91.8 100.5 101.7 98.2
GDP in real terms to 1990 100 61.4 61.7 62.7 61.6
Industrial Share in GDP 20 .5 23.5 21.2 21.4 23.8
Number of Industrial 
Enterprises 19,796 17,924 17,156 15,791 13,676
Industrial Production in 
percent to the previous year 99.2 91.8 100.3 104 97.6
in percent to 1990 100 48 48.2 50.1 48.9
Number of Industrial 
Workers in percent to 1990 100 75.5 67.4 59.2 55.7
Price Index of Industrial 
Goods in percent to the previous year 104.4 240 123.8 115.5 100.8
 
 The most rapid drop was noted in the processing industries - light, chemical and petrochemical industries, machinery building and metal processing, construction material industry 
(Table 3).  
 Uneven contraction in production in the sectors as well as varied dynamics of the prices for 
their products have resulted in a number of significan t changes in the industrial structure of Kazakstan 
for the last years.  The shares of  the industries related to oil extr action and processing, gas processing, 
products of the ferrous and non-ferrous  metallurgy increased (Table 3).  WT/ACC/SPEC/KAZ/4/Add.2 
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 Table 3:  Industrial Structure of the Republic of Kazakstan  
 
 1990 1991 1992 1993 1994 1995 1996 1997 1998 
Industry, Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 
Electric Power 5.3 5.0 9.3 17.7 18.9 16.1 15.2 13.5 16.7 
Fuel Industry 10.2 7.5 19.5 15.4 21.9 25.0 20.0 27.1 21.1 
Including:          
Oil and Gas 4.1 4.4 12.6 9.9 13.0 16.8 14.2 17.7 17.7 
Coal Mining 6.1 2.9 6.9 5.5 8.9 8.2 5.8 9.4 3.4 
Ferrous Metals 6.1 5.5 10.7 10.0 11.9 15.1 10.7 12.0 10.0 
Non-Ferrous 
Metals 9.5 8.6 17.0 12.7 12.0 11.8 11.8 13.7 13.4 
Machinery 
Building and Metal 
Processing 15.9 11.0 8.5 10.2 7.3 7.4 7.1 5.0 3.6 
Chemical and 
Petrochemical 6.3 6.0 7.6 3.7 3.7 3.8 3.6 2.1 1.6 
Construction 
Material 
Industry 5.6 4.8 6.4 5.5 4.1 3.7 2.9 2.2 2.3 
Light Industry 15.6 17.0 6.4 5.9 3.8 2.4 2.4 2.1 1.9 
Other Industrial 
Productions 25.5 34.6 14.6 18.9 16.4 14.7 26.3 22.3 28.1 
 
 A decline in investments in fixed assets in th e whole economy of this country was seen in 
1990-1998.  High rates on short-term credit resources and lack of long-term credits due to high risks 
in the real sector facilitated the outflow of inv estments from the production sector into the sector of 
trade and investments made in state securities.   Lack of investments in the industrial sectors on the whole and their primary use for the purpose of development of the mining sector caused technological retardation in all processing industries. An analysis of use of production capaciti es shows their insufficient use, in particular by 
processing enterprises.  The average use of the ava ilable production capacitates is only 56.4 per cent 
in the metallurgy sector, oil transporting - only 43 .7 per cent, food product production - only 25.6 per 
cent, textile and clothing sectors - only 21.7 per cen t.  Less then 10 per cent of the capacities were 
used in the machinery building, chemical i ndustry, wood production and wood item production, 
paper, cardboard producing i ndustries and publishing. 
 
 The production potential of the industrial sectors is hurdled from growing by lack of turnover 
capital, a drop in the production of agricultural ra w materials, low solvent demand of the population, 
pressure from the legal and shadow imports.   For instance, the low solvent demand forces the population to buy cheaper and low-quality of 
industrial goods.  Under such conditions, industri al consumer goods produced in Kazakstan are not 
able to compete with cheap goods imported from othe r countries, where their production is subsidized 
by governments.  The capacity of the Kazakstani ma rket of non - food products is two times smaller 
than that of the production market, and it compri sed US$1.5 billion in 1997 and US$1.6 billion in 
1998.  Light industry products (49 per cent), furnitu re and consumer items (16 per cent) account for 
the biggest share in the market.  The volume of  produced non - food products produced domestically 
accounts for (US$150-200 million), and the non-food ma rket is saturated for more than 90 per cent 
because of imported products.   WT/ACC/SPEC/KAZ/4/Add.2 
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  Statistically registered importation of  non-food consumer products accounts for 
US$600-700 million a year.  The rest products, whic h accounts for almost US$2 billion is imported 
through the shuttle import and by way of smuggling.   Clothes and footwear (24 per cent), motor cars 
(22 per cent), radio and television appliances (18 pe r cent), furniture (eight per cent), soap and 
detergent (six per cent) dominate among registered imports. 
 
 Export of non-food (industrial) consumer products does not exceed US$100 million a year. 
Almost all products are exported to the CIS countries.    The basic reason of the reduction of the domes tic production of the light industry products 
consists in decreasing of their competitiveness in comparison with the products, which are imported 
by way shuttling.    The situation in the light industry is still deteri orating. In comparison with the other branches 
of industry, the production slump in this industry was a most significant one for the last five years 
(Table 4). 
 
Table 4:  Light Industry Production Volume
 
 
Indicator MU1 1993 1994 1995 1996 1997 1998 1999 
Light Industry 
Products in 
Current Prices billion 
Tenge 1.3 12.9 16.5 17.5 17.2 13.1 17.98
In US$ million 
dollars 503.9 360.7 270.8 260.1 228.1 167 150.3
In Prices for 1993 billion 
Tenge 1.3 0.7 0.3 0.4 0.3 0.3 0.3
Fabric million 
square 
meters 188.1 107.1 31.1 28.4 19.6 12.7 12.5
Carpets and 
Articles Thereof million 
square meters 1.4 0.7 0.2 0.2 0.2 0.17 0.15
Leg-Wear 
Garment million 
pairs 71.5 41.0 11.5 6.0 4.0 2.4 0.89
Cattle Leather thousand 
square 
deci-meters 276.6 72.4 18.9 16.4 3.8 3.6 1.7
Footwear million 
pairs 16.2 7.8 2.1 1.5 1.1 1.1 0.8
 
 The problems of raw material supply of the light  industry, inability of its products to compete 
with the imported goods resulted practically in a full  collapse of the industry.  Currently, its share in 
the volume of products of the whole industry is 1.8 per cent and, over the years of reforming, it has 
reduced by 10.7.  
  The undertaken reforms and measures aimed at financial and econom ic rehabilitation of 
insolvent enterprises, toughening of the requirement s to insolvent enterprises, their bankruptcy and 
liquidation could not stop the process of deteriorati on of the financial position of such enterprises. 
 
 More then a half (51 per cent) of the ente rprises and organizations that submitted financial 
reports came to the end of 1999 with negative financ ial results.  Their total losses came down to 31.4 
                                                     
 
1 MU- Measurement Unit.  WT/ACC/SPEC/KAZ/4/Add.2 
 Page 7 
 
 
 billion Tenge, including the mining industry, wher e the share of loss-making enterprises and amount 
of losses reached respectively 48.3 per cent or 4.2 b illion Tenge, the processing industry - 50 per cent 
and 9.3 billion Tenge, power produc tion and distribution, gas and water supply - 60 per cent and 
8.8 billion Tenge, transport and communications - 65.4 per cent and 5 billion Tenge. The number of 
loss-operating enterprises by region ranges from 20.3 pe r cent in the Atyrau Oblast to 69 per cent in 
the Akmola Oblast.  As of the end of 1999, ente rprises and organizations in the Karagandinskaya 
Oblast made losses of 6 billion Tenge, in the Ko stanaiskaya Oblast - 1.4 billion Tenge, in the 
Akmolinskaya Oblast - 1.3 billion Tenge, in the Ak tubinskaya Oblast - 1.1 billion Tenge, in the 
Jambylskaya Oblast - 1 billion Tenge, in the No rthern Kazakstanskaya Oblast - 813 million Tenge, 
and the Alamty Oblast - 356 million Tenge. 
 
 The typical problems of many big K azakstani enterprises are as follows:  
  - low liquidity of products due to low competitiveness, because of higher prices in 
comparison with the prices for similar produc ts produced in other countries, both in 
the domestic and foreign markets; 
 - insufficient measures on the protection of the domestic market - import of subsidized 
goods or goods sold at dumping prices, wh ich are analogues to goods produced by 
domestic producers; 
 - restrained financial and economic situati on of the majority of enterprises, lack of 
turnover funds and investments in the development of production; and 
 - high transportation costs that reduce the competitiveness of domestic goods. 
  The rampant extensive development of the mining industries with a major purpose to export raw materials contributes another disrupting elemen t to the current high instability caused by a 
growing dependence on changes and developments in the world markets. 
 
The results of the work of industrial enterprises showed that Kazakstan, being a part of the 
world economy, can by influenced by the impact of the world “price shocks”.  Thus, as a result of the 
price fall at the world markets, the volumes of produ ction of export oriented products have sharply 
decreased.  First of all, this is influenced the oil and gas sector and non-ferrous metallurgy.  The 
biggest losses have been incurred by such metall urgical giants as JSC “Ispat- Karmet”, JSC 
“Ferrocrom”, open JSC “Kazztink”, JSC “Kazakhmys”. 
 The machine building industry takes the special  place in the development of economy of any 
country, because this branch of industry is of  a bigger prospective in the terms of production 
development up to the fourth and the fifth limits.  
 
The financial position of enterprises of machin e building complex during the last several 
years was very tight due to non-adjustment of economy to new market conditions at the time of 
economic reforms as well as due to the loss of trad itional consumer markets.  The machine building 
branch of the industry has been formed taken into account regional specific of the needs of the former 
Soviet Union, and it was not oriented to meet th e needs of the economy in basic types of machines 
and equipment, that was the reason of the “one-s ided” development of the branch of industry.  
 The Government of the Republic intends to im plement the policy of support and stimulation 
of production in the machine building industry in order to use the available production capacities and 
meet the needs of oil, energy and agricultural sect ors and other related branches of the industry in 
equipment and spare parts.  
 After the collapse of the former Soviet Union, Kazakstan depends from the import of 
pharmaceuticals, that, in combination with financial de ficit, which arose at the stage of transition to 
the market economy and due to the breakdown of economic ties between CIS countries, resulted in 
significant deterioration of supply of the populatio n with pharmaceuticals.  According to USAID WT/ACC/SPEC/KAZ/4/Add.2 
Page 8  
 
 report, the cost of pharmaceuticals in Kazakstan in  comparison with 1993 was increased by 154.  The 
absence of a highly developed domestic pharmaceuti cal production appeared to become a significant 
social problem. 
 The pharmaceutical industry of the Republic is characterized by production of substances of 
plant and animal origin, as well as the simplest pha rmaceutical forms:  tinctures, extracts, liniments, 
mixtures and others.  Production of modern ready ma de pharmaceutical forms such as pills has been 
recently initiated.  
 Products such as:  oil, gas and a limited numbe r of products of ferrous and non-ferrous 
metallurgy are the only basic source of financial and currency receipts to the economy of Kazakstan. 
Revenues from export of these products forms a reve nue article of the republican budget in great 
extent  
 Developed in the former Soviet Union, the Kazakstani oil refinery was conceived from the 
technical and economic stand point as part of the oil sector of the whole economy of the former Soviet 
Union. That is why production of kerosene (aviatio n gasoline), winter diesel fuel, lubricants is not 
enough developed.  
 Crises at world oil market considerably worsened  the position in the oil and gas sector.  It has 
influenced the finical stability of the country, b ecause the revenues of the oil sector of Kazakstan 
comprise 30 per cent of the receipts to the budget. 
 The process of integration to the world economy is slow due to the absence of possibilities to 
offer wide assortment of goods of top quality for fo reign buyers as well as due to insufficient use of 
the potential of the country to develop trade with other countries. 
 
Thus, we can define three big categories in our offers. 
 
The first category of goods includes textile a nd light industry products (clothing, footwear, 
etc.).  As stated above, the light industry and pr oduction of consumer goods in  this Republic remains 
crisis-stricken.  In respect of goods  of the this category, we offer to bind the rates of import customs 
duties at a relatively high level to ensure the ade quate protection for domestic producers.  It should 
also be noted that the rates of import customs tari ffs for textile, clothing, footwear, leather, Indian 
rubber, transport equipment, fish and sea products in the WTO member countries that account for a larger share of the world trade in such goods changed insignificantly after the Uruguay Round and 
remain relatively high. 
 
 As to the second category of goods that includes bigger part of tariff lines, we offer to bind the tariffs at a lower level.  This includes minera l raw materials, products of the ferrous metallurgy, 
chemical and wood processing industry, equipmen t, pharmaceutical prod ucts and others.  
  The third category of goods (natural gas, tires, carpets, etc.) relate to domestic production that 
are the starting bases for the development of certain sub-sectors and enterprises, producing such 
goods, are among the major urban development factor s.  We offer to leave such tariffs unbound. 
These tariffs account for 2.5 per cent of the total number of tariff lines.   During the transition period, the state cannot completely relieve itself of the burden of 
responsibility for the producing sectors of the econom y.  Therefore, it is necessary to develop a 
system of state measures to include measure s aimed at rehabilitation of the industries and 
diversification of their production.   The state works towards a gradual growth of th e share of added value in the total volume of 
exported products, substitution of exports of raw materials with better processed products.  WT/ACC/SPEC/KAZ/4/Add.2 
 Page 9 
 
 
  
 This will also allow to solve the problem of growing unemployment and income of the 
population, to increase the solvent demand.   The period of transition should also be viewed as a period of preparation to integrate the 
economy of Kazakstan into the world market and to allow businesses to acquire necessary skills to 
strive and survive in open markets.  
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