Untapped Potential: Business Opportunities in the CIS

Author: Neil Petch, Chairman and Co-Founder
business-opportunities-cis-countries

The Commonwealth of Independent States (CIS) offers a wealth of untapped business and investment opportunities, especially for UAE-based companies that are looking to expand to easily accessible markets. 

Formed in 1991, the CIS is an association of countries that were previously part of the Union of Soviet Socialist Republics (USSR). Currently, the official member countries of CIS include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan. Although they are not official members at the moment, Ukraine and Turkmenistan participate in CIS.

A report published by the Dubai Chamber of Commerce and Industry identified the following sectors as the top contributors to CIS’ GDP: services, industry and agriculture.

The report added that all CIS economies have witnessed an improvement in the ease of doing business, as measured by the World Bank. Several CIS countries have also enacted reforms in property registration, contract enforcement and taxation.

Advantages of investing in the CIS market 

CIS countries have emerged in the last 10 years as a key investment hub with a business-friendly environment, which is accompanied by initiatives that aim to attract foreign investors with exceptional financial benefits. 

Here are the main advantages of investing in the CIS region:

  1. Access to a bigger market: Located on the Silk Road, Kazakhstan is positioned as a bridgehead for companies wishing to enter the Central Asian markets that represent 50 million consumers. For businesses that are aiming to expand their international customer base, the CIS market offers lucrative options in various sectors.
     
  2. Constantly improving business environment: To facilitate commercial transactions, Kazakhstan, Russia and Belarus established the Eurasian Customs Union in 2010, which removed customs duties among these three countries. Together with Armenia and Kyrgyzstan, they subsequently created the Eurasian Economic Union in 2014.
     
  3. Attractive tax incentives: In Kazakhstan, foreign investors who participate in priority investment projects and conclude an investment contract with the relevant authorised body can enjoy exemptions on corporate income tax, which is 20%, for up to 10 years and land tax for up to 10 years.

    Foreign investors can also get a reimbursement of up to 30% of the actual expenses on construction and purchase of equipment. Moreover, to prevent double taxation, Kazakhstan has signed agreements with 53 countries. 

    A country rich in mineral resources, Kyrgyzstan has special economic zones that generally offer a tax-neutral regime and exemption from customs duties. Meanwhile, Armenia allows foreign investors to delay VAT payments for up to 3 years, if the VAT is applicable on imported equipment and goods for investment projects approved by the government. 

    On the other hand, its neighbouring country, Georgia, applies 0% corporate income tax on retained and reinvested profit; profit tax is only charged on distributed earnings. Additionally, Georgia does not impose taxes on capital gains, wealth or inheritance.
     
  4. Full foreign ownership:  In all CIS countries, full foreign ownership is allowed in specific sectors such as banking, construction, tourism and retail, health care and waste management.

Top Business Opportunities 

The energy sector plays a large economic role in several CIS countries, given their vast reserves of oil and natural gas. Insurance, software technology, aviation business and airport infrastructure are also some of the investment sectors with high potential in the CIS.

Key economic sectors in CIS countries

Kazakhstan

  • Oil and gas equipment and services
  • Renewable energy
  • Agriculture
  • Franchising
  • Healthcare
  • Information and communication technologies
  • Infrastructure
  • Mining equipment and services

Russia

  • Oil and gas
  • Fish and seafood
  • Farming of grains
  • Aviation
  • Mechanical engineering and metal work
  • Timber and furniture
  • Educational consultancy
  • Coffee shops
  • Clothes and accessories

Armenia

  • Tourism
  • IT
  • Jewellery making and diamond cutting
  • Textile and garment
  • Renewable energy
  • Bottled mineral water

Azerbaijan

  • Agriculture
  • Construction and real estate
  • Hospitality
  • Manufacturing
  • Oil and gas
  • Rent-a-car services
  • Tourism companies and travel services

Belarus

  • IT
  • Pharmaceuticals
  • Food industry
  • Biotechnologies
  • High-tech industry
  • Nanotechnologies
  • Equipment manufacturing
  • Agriculture
  • Construction

Kyrgyzstan

  • Mining
  • Light farming hardware
  • Pharmaceuticals
  • Oil
  • Hydroelectricity
  • Horticulture

Moldova

  • Transport infrastructure
  • Telecommunication and mobile export
  • Railway construction
  • Electricity

Tajikistan

  • Energy
  • Mining
  • Chemicals
  • Construction materials manufacturing
  • Food and beverage
  • Agriculture and agricultural processing products
  • Transportation

Uzbekistan

  • Commercial banks
  • Insurance companies
  • Energy, oil and gas sectors
  • Construction
  • Chemical and pharmaceutical industries
  • Automobile
  • Railway projects

Turkmenistan

  • Fuel processing
  • Cotton processing
  • Gas export
  • Industrial and agricultural raw material export

Ukraine

  • Agriculture
  • Information technology
  • Turbines, trains and automotive components
  • Pharmaceuticals
  • Food and beverage production

With the huge untapped potential of CIS countries, establishing a presence in the region can grant businesses access to new markets and expand their international footprint. It also gives them proximity to one of the biggest economies in the world: China.

Virtuzone CIS: Helping businesses access the CIS region

Seeing the fast economic development in the emerging markets of the CIS region, Virtuzone has launched Virtuzone CIS to help businesses based in the UAE and abroad to access the trade and economic opportunities in Central Asia. 

We have formed a joint venture with Seven Pillars Law, one of Central Asia’s leading law firms, to provide exceptional company formation and legal services in Kazakhstan, which can serve as a springboard for foreign companies aiming to access the rest of the CIS market.

If you are interested in setting up a business in Kazakhstan to enter the CIS market, please fill out the form below, so our team can get in touch with you.

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Disclaimer

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