business opportunities in the CIS

The CIS, or Commonwealth of Independent States offers massive investment and business opportunities; especially for UAE based businesses wishing to expand to profitable and easily accessible markets. Therefore, there are many reasons why UAE companies are considering the business opportunities in the CIS.

In this article, we will ensure you understand everything about conducting business in CIS countries and why it is a good choice. Further, these accessible markets offer accessible opportunities for UAE businesses relocating there. In addition, with us, you will have a smooth relocation if you want to take your business to the next level. Let us see the following:

  1. What is the best way to conduct business in the CIS region?
  2. How many CIS countries are there?
  3. Why should you conduct business in the CIS region?
  4. What are the best business opportunities in the CIS region?
  5. How good are the economies of CIS countries?
  6. How can we assist you to take advantage of the business opportunities in the CIS region?

1. What is the best way to conduct business in the CIS region?

Some of the countries where UAE companies tend to do business in CIS countries are Ukraine, Belarus, Kazakhstan, and Russia. If you are thinking about the business opportunities in the CIS region to open a representative office or a subsidiary on paper; registering your local entity with the government bodies in charge is a painless process.

However, the steps to maintain the local entity tend to be complex. With soviet-style processes and the amount of time it takes to handle them affects opening a bank account. 

If you do them on your own, these tasks may even affect obtaining work visas for your workers, organizing a legal address; notarizing and translating all legal documents, and hiring and recruiting a head or general director of the representative office.

In addition to this, these countries have different economic and political environments. But in many of these CIS countries, opening a legal entity is a good option. So how can you bypass these steps? On Connect Free Zone, we provide you with the best solutions to mitigate risk and save time. 

2. How many CIS countries are there?

The CIS (Commonwealth of Independent States) was created in 1991. It is the association of countries that used to be part of the USSR. Currently, the official members are the following:

  • Armenia.
  • Azerbaijan.
  • Kazakhstan.
  • Belarus.
  • Kyrgyzstan.
  • Russia.
  • Moldova.
  • Tajikistan.
  • Finally, Uzbekistan.

Although they are not current official members, Turkmenistan and Ukraine participate in the CIS.

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

  • Agriculture.
  • Services.
  • Industry. 

In addition, the report included that most CIS countries have witnessed an improvement in the ease of conducting business, as stated by the World Bank. Various CIS countries have also implemented policies in contract enforcement, taxation, and property registration.

3. Why should you conduct business in the CIS region?

There are many business opportunities in the CIS. You should note that these countries have come up in the past 10 years as important investment hubs with business-friendly policies. In addition, these governments are also implementing policies to attract foreign investors with outstanding financial benefits. 

Some advantages of conducting business in CIS countries are the following:

3.1. A constantly improving business environment 

To ease commercial transactions; Belarus, Kazakhstan, and Russia created the Eurasian Customs Union in 2010. This helped them to remove customs duties among these 3 markets. Subsequently, Kyrgyzstan and Armenia established the Eurasian Economic Union in 2014. 

3.2. Access to bigger markets

Positioned on the Silk Road, Kazakhstan is located as a connection for businesses looking to start working in Central Asian markets which represent more than 45 million consumers. Moreover, for companies wishing to expand their international client base, the CIS region offers profitable options in various sectors. 

3.3. Attractive tax incentives

In Kazakhstan, foreign individuals participating in investment projects can finish an investment contract with the government body in charge and enjoy exemptions on corporate income tax; which is 20% for up to 10 years, and the property tax for another 10 years. Foreign investors may also obtain reimbursement of 30% of the actual expenditure on the purchase of equipment and construction.

To prevent double taxation, this business-friendly country has signed agreements with more than 50 countries.

Kyrgyzstan, on the other hand, is a country rich in mineral resources; just like the UAE free zones, it has special economic zones that offer exemptions from customs duties and a tax-neutral regime. Armenia, however, allows foreign individuals to delay VAT payments for up to 3 years if it is applicable on imported goods and equipment for investment projects approved by the government.

Kyrgyzstan is a country rich in mineral resources and has various economic zones that use to offer low-tax regimes and custom duty exemptions. Armenia, on the other hand, allows foreign individuals to not pay VAT for up to 3 years if applicable is applicable on imported equipment and goods for investment projects.

Its neighboring country, Georgia, applies zero corporate income tax on reinvested and retained income; meaning that profit tax is only collected on distributed earnings. In addition, this country does not impose taxes on wealth, inheritance, and capital gains. 

3.4. Full foreign ownership

You should note that other business opportunities in the CIS are foreign ownership; it is allowed in specific sectors such as construction, banking, retail, waste management, tourism, and health care.

4. What are the best business opportunities in the CIS region? 

The energy industry plays an important role in various CIS countries, due to their vast reserves of natural gas and oil. Similarly, software technology, airport infrastructure, aviation business, and insurances are some of the investment industries with the most potential in the CIS.

The key economic sectors and business opportunities in the CIS region are the following:

Armenia

  • Diamond cutting and jewelry making.
  • Bottled mineral water.
  • Textile and garment.
  • Renewable energy.
  • Tourism.
  • IT.

Kazakhstan

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

Russia

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

Moldova

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

Azerbaijan

  • Real estate and construction.
  • Rent-a-car services.
  • Tourism companies and travel services.
  • Manufacturing.
  • Agriculture.
  • Hospitality.
  • Lastly, oil and gas.

Belarus

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

Kyrgyzstan

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

Tajikistan

  • Agriculture and agricultural processing products.
  • Food and beverage.
  • Energy.
  • Transportation.
  • Mining.
  • Construction materials manufacturing.
  • Finally, chemicals.

Uzbekistan

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

Turkmenistan

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

Ukraine

  • Pharmaceuticals.
  • Turbines, trains, and automotive components.
  • Food and beverage production.
  • Agriculture.
  • Lastly, IT.

With massive business opportunities in the CIS, creating a presence in the region can grant UAE companies -whether they are in Dubai, Abu Dhabi, or any other emirate- access to new markets while increasing their international mark. In addition, it also grants you proximity to one of the largest economies around the globe: China.

5. How good are the economies of CIS countries?

In 1994, CIS countries started negotiations on establishing a free trade area (FTA). However, they did not reach an agreement. Hence, a proposed free trade agreement would have covered all CIS members and treaty countries except Turkmenistan. 

But in 2009, a new agreement was started again to create an FTA, the CIS Free Trade Agreement (CISFTA). Two years later, in October 2011, the new trade agreement was signed by 8 of the 11 CIS prime ministers, which are the following:

  1. Armenia.
  2. Belarus.
  3. Kyrgyzstan.
  4. Russia.
  5. Moldova.
  6. Ukraine.
  7. Kazakhstan.
  8. Finally, Tajikistan.

At first, the treaty was only ratified by Ukraine, Belarus, and Russia but at the end of 2012, Moldova, Kazakhstan, and Armenia also completed the ratification. After that, in December 2013, Uzbekistan signed and then ratified the FTA treaty; meanwhile the remaining two signatories, Tajikistan and Kyrgyzstan later both ratified it in December 2015 and January 2014 respectively.

However, Azerbaijan is the only CIS member state that is not participating in the free trade area (FTA). Similarly, this free trade agreement eliminates import and export duties on various goods but; it also contains various exemptions that are phased out ultimately. 

On the other hand, the member countries also signed an agreement on the basic principles of currency control and currency regulation in the CIS at the same October 2011 meeting.

Among the encouragement of business opportunities in the CIS; Nursultan Nazarbayev, Kazakhstan’s president proposes that CIS countries take up a digitalization agenda to modernize and improve their economies.

5.1. History of the common economic space in the CIS region

After discussing the creation of a common economic space between CIS states such as Ukraine, Kazakhstan, Belarus, and Russia in principle about the creation of this economic space after a meeting on February 23rd, 2003. Thus, this economic space would have a commission on tariffs and trade that would be based in Kyiv, Ukraine with supranational powers. Further, this common economic space would be headed by a Kazakhstan representative, and would not be subordinated to the 4 nations’ governments. 

Further, the ultimate goal would be a regional group that would be open for other important countries to join as well. Most importantly, that could eventually lead to a single currency among these countries.

In May 2003, the Ukrainian Parliament (Verkhovna Rada) voted 266 votes in favor and 50 against the common economic space among these countries. However, the victory of Viktor Yushchenko in the Ukrainian presidential election of 2004 was a disaster for the project. Moreover, Victor Yushchenko had shown interest in joining the European Union and this membership went against the envisioned common economic space. Viktor Yanukovych, Yushchenko’s successor, stated in April 2010 that:

Ukraine’s entrance into the Customs Union of Kazakhstan, Russia, and Belarus is not happening since the regulations and economic principles of the World Trade Organization do not allow it, and we develop our economy based on WTO principles. 

Since 2008, Ukraine has been a member of the World Trade Organization. Nonetheless, a Customs Union of Belarus, Russia, and Kazakhstan was thus established in 2010. In addition, a single market was envisioned for 2012; but this union was renamed the Eurasian Customs Union and expanded to include Kyrgyzstan and Armenia in 2015.

6. How can we assist you to take advantage of the business opportunities in the CIS region?

Small companies, startups, and established organizations can benefit from the different CIS fields. As aforementioned, most CIS business environments will be beneficial for your business. For this reason, seeing the development of emerging markets in CIS countries, we have launched our services to help companies based in the UAE access trade opportunities in Central Asia. 

When you start working with us, the incorporation process will become smooth and simpler. On Connect Free Zone, we offer you the best experience in the regulations regarding corporate leasing, employment, remote business setup, residential licenses, and more.  

We work hard to provide you with the best and most cost-effective setup solutions, pricing, and packages around the UAE. As a result, you will have the best incorporation in any UAE free zone or Mainland area

We understand how difficult it is to complete this tedious process, especially if you are on your own. We have more than 21 years of working with companies in the UAE, which led us to obtain the right expertise and experience. This enabled us to offer the best value-added services for your business.

Do you want us to work side-by-side with you to access the business opportunities in the CIS? We can become your partner in this and other processes, in this way, you only need to focus on your business. Also, if you want to obtain the best services or you have any inquiries, you can call us at +971 43 316 688 or email us via contact@connectfz.com. Contact us!

Do you want to access the best job opportunities so you can improve your personal career? You can go to thetalentpoint.com. However, we will not store any resumes or CVs sent to contact@thetalentpoint.com.

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Connect free Zone is the go to place when it comes to company set up services, you will find standard pricing, discounts and packages for the most popular free zones across the UAE as well as the ability for Connect FZ to sponsor your company and set up on mainland Dubai.

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