In February – March 2022 EY Kazakhstan in cooperation with the Uchet franchise network conducted the first local survey of Kazakhstan’s market for outsourcing financial, tax, payroll and HR administration functions.
Key outcomes of the survey show that less than 10% of businesses outsource accounting services in Kazakhstan. In other words, this is a new blue ocean for Kazakhstan’s outsourcing businesses. With a market of 13 million potential clients – individuals subject to personal tax filing – to open up by 2025, it can be assumed that Kazakhstan is a promising outsourcing market, which will grow vigorously, because up to 90% of Western companies already do outsource of their non-core functions.
Among Kazakhstan’s neighbors, Russia is the biggest market. Its outsourcing market amounted to $12.5 billion in 2021, according to a NeoAnalytics survey. In view of interest on the part of Russian, Ukrainian and Belarusian businesses in Kazakhstan amid geopolitical uncertainty, the outsourcing market could grow considerably as soon as Q2 and Q3, 2022:
- 400,000 companies on the local market
- A market of 13 million individuals subject to personal tax filing to open up by 2025
- 800 providers of outsourcing services, each serving in average 20 to 50 clients
- $12.5-billion market of accounting and HR outsourcing in 2021, +10% annual growth.
The EY & Uchet survey found that nearly 25% of more than 260 interviewed Kazakhstan-based entrepreneurs from various industries outsource accounting, and more than 16% outsource HR administration functions, while nearly 40% have never outsourced such functions.
Kazakhstan’s businesses, like their Western peers interviewed within the globally conducted 2022 EY Tax and Finance Operations Survey[1], noted that the key challenges for accounting and tax functions are retaining and transforming their talent and keeping up with ongoing and multiple legislative and regulatory changes.
Among other constrains Kazakhstan’s entrepreneurs noted concerns about data confidentiality and service quality as well as high costs, that is why local companies are not rushing to outsource their accounting and tax compliance functions to external service providers.
The survey suggests that businesses in Kazakhstan do not have sufficient trust to outsourcing providers yet. Nevertheless, executives noted benefits of outsourcing, such as the mitigation of reputational, commercial, tax, labor and financial risks, as well as timely law changes’ tracking and support for businesses during their adaptation to these frequently changing requirements and administrative practices.
For today Kazakhstan’s outsourcing market utilizes only up to 10% of its capacity. It would be exciting to conduct the new surveys in one, three and five years to compare dynamics and measure outsourcing market development, taking into account the growing demand for new companies and the expanded functional profile of the businesses operating in Kazakhstan.
Authors:
Svetlana Ceban, Associated Partner, EY Kazakhstan, Global Compliance and Reporting Leader
Anna Osipova, co-founder of the Uchet franchising network of outsourced accounting service providers in Kazakhstan
[1] Realizing the value of your tax and finance function | EY – Global