KHAZ AK HS T AN T O AL L OC AT E

SUBS ID IE S FO R F OR E IGN
TOUR IS T S
HTTPS://ASTANATIMES.COM/2021/12/KAZAKHSTAN-TO-ALLOCATE-SUBSIDIE
S-FOR-FOREIGN-TOURISTS/#:~:TEXT=NUR%2DSULTAN%20%E2%80%93%20TH
E%20KAZAKH%20GOVERNMENT,15.

DATE PUBLISHED: 29TH DECEMBER 2021

DATE WRITTEN: 8TH FEBUARY 2022

Aryaman Padia
Word Count: 793
Kazakhstan to Allocate Subsidies For
Foreign Tourists
BY SANIYA BULATKULOVA IN TOURISM ON 29 DECEMBER 2021

NUR-SULTAN – The Kazakh government will allocate extra funds to travel companies for
each foreign tourist to offset the costs of companies starting from Jan. 1, 2022, according to
the decree of the Kazakh Ministry of culture and sports from Dec. 15.

Many foreigners decide to move to Kazakhstan after visiting the country as tourists. Photo
credit: platon.asia

The subsidy amount is 15,000 tenge (US$34,61) for each foreigner, who comes to the
country using the services of local travel firms.

As several tourist experts point out, such a reform was implemented to foster the recovery
of the tourism sector after the pandemic lockdown measures and motivate travel
companies’ employees to attract more tourists and raise the industry to a new level.

To receive a subsidy, a tour operator has to submit an application in paper or electronic

form by email or personally to the relevant authority.

“We would like this system to operate, but it is slow because our country is still closed to
foreign visitors,” said Inna Rey, President of Kazakh Association of Tour Operators, in her
interview with the KTK television channel.

According to data released by the Kazakh Bureau of National Statistics, there were 8,789,314
foreign tourists in the country in 2018, 8,514,989 – in 2019, and 2,034, 753 – in 2020.
To date, nationals of 54 countries need a visa to enter Kazakhstan. They may also receive a
single entry visa without a letter of invitation in such categories as A3 (service visa), B1
(business visa), B3 (business visa), B10 (private visa), and B12 (tourist visa).

There are several countries whose citizens are eligible to enter without visas, as Kazakhstan
has concluded separate bilateral agreements on mutual visa-free travel with them.  They
include Azerbaijan, Armenia, Belarus, Moldova, Russia, Georgia, Kyrgyzstan, Tajikistan,
Turkmenistan, Uzbekistan and Ukraine.
Microeconomics IA
The following article talks about the subsidy being granted by the Kazakhstan

Government to the different travel agencies and companies for each foreign tourist to

“offset the costs of companies.” It talks about how experts believe that such a

subsidy was granted to foster the recovery of the tourism sector in Kazakhstan. It

wants to help travel companies to attract more foreign tourists.

A subsidy is a direct or indirect payment to individuals or firms usually in form of cash

payment from the government or tax cut. In Economic theory, subsidies can be used

to offset Market Failures and externalities to achieve greater economic efficiency. 1

Price S
S1

Pe

Pc

D
Q Q1
Quantity

1
https://www.investopedia.com/terms/s/subsidy.asp#:~:text=A%20subsidy%20is%20a%20direct,to
%20achieve%20greater%20economic%20efficiency.
Subsidies reduce the cost to produce for suppliers. This will cause producers to

increase their output as they can earn higher profits per unit. Hence, the supply

curve will shift to the right. When supply curve shifts to the right in a market, the

market price for consumers to purchase decreases from PE to Pc. The lower price is

made possible as the consumers is receiving PEPS of the subsidy for Q units of the

product in the market. Hence, the blue area is the subsidy taken up by the

consumer. However, as we recall, the vertical distance is the entire amount of the

whole subsidy. Therefore this diagram is incomplete.

The diagram above shows the effects of subsidy on the tourism industry in

Kazakhstan before and after the grant of subsidy.

From the article we see that the number of tourists coming into Kazakhstan has been

on a decline and suffered a severe blow in 2020 when the number dropped to

2,034,753 foreign tourist from 2019’s 8,514,989 which was already lower than 2018’s

8,789,314. This low number was due to the occurrence of covid-19 pandemic.

The government has allowed a subsidy of 15,000 tenge person tourist which is

approximately 3,461 Dollars. The tourism accounted for 0.3% of the country’s GDP

but the government tends to increase it to 3% in 2020 2. The tentative number of

tourist being 8,000,000 the total expenditure would be 12 Billion Tenge which is

approximately 28 million Dollars.

Impact of the given solution:

2
https://www.theguardian.com/world/2014/jul/17/kazakhstan-eases-visa-restrictions-attract-tourists
 Price Subsidy
S1
Expenditure S

P1

P2

Quantity

The amount of subsidy is shown by the gap above, this represents the government’s

expenditure which is the amount calculated above (28 million dollars). As the subsidy

is granted, we know through the law of demand as the price of a product or service

decreases the demand for it increases, keeping all the other things constant.

The average stay for a foreign tourist in Kazakhstan ranges from 1-2 weeks, with the

average per day cost being 8,000 Tenge (approximately) and total cost of travelling

being 111,806 Tenge which is 262 Dollars3. Therefore, a tourist spends

approximately 262 dollars excluding the cost of travelling. The government wants to

receive a total of 2 Billion Dollars from the tourist income. The current GDP of the

country is 165.50 Billion Dollars. At the current number of tourists, tourism income

will only account for 1.2% the GDP which is 1.8% lesser.

2)

Price S1
S

3
https://www.budgetyourtrip.com/kazakhstan#:~:text=You%20should%20plan%20to%20spend,
(%240.64)%20on%20local%20transportation.
 P1

P2
Extra
Expenditure

Quantity

Due to covid-19 pandemic Kazakhstan’s GDP shrunk by 2.5% in 2020 4. To recover

from this the Kazakhstani Government is taking many steps one of which being the

granting of subsidies. As the covid-19 pandemic continues the future remains

uncertain and the risk remains that increasing government expenditure can lead to

the economy worsening. As granting subsidy which they do from the taxes earned

from the citizens. Granting subsidy may also lead to increase in taxes as the

government expenditure increases the income also needs to increase. When the

government grants subsidy there is Opportunity cost which may lead to the

resources not being allocated efficiently.

Conclusion:

Even though the government may have a positive outlook with regards to the

subsidy being granted we have seen that it can go either of 2 ways. It may go as

planned and help boost government income or with the worsening of the covid

situation the plan may fail and lead to wastage of government expenditure. All in all it

is suggested to the government of Kazakhstan to go ahead with the subsidy which is

being given as we have seen in other instances that subsidies the foreign tourism

industry has shown to be very successful and may as well be this time. But, the
4
https://www.worldbank.org/en/news/press-release/2021/01/29/kazakhstan-economic-update-december-
2020#:~:text=The%20spread%20of%20the%20pandemic,by%202.5%20percent%20in%202020.
government must be very cautious and ready for an uncertain failure as discussed

above. Reaching the targeted goal may even take more than the given time

depending on Covid-19 pandemic and the number of tourists visiting. Still

government must take up the required step.