Kazakhstan attracts over $376bn in FDI since independence, push to attract foreign investments
In terms of industries, the largest increase in foreign investment was in manufacturing - by 57.2 percent, trade - by 45.8 percent, mining - by 27.1 percent, and transport - by 20.4 percent. And in terms of regions, the greatest investment activity was in the Atyrau region - $3.6 billion, an increase of 15.4 percent, largely driven by big oil and gas projects in the region, Almaty - $3 billion, an increase of 26.3 percent, and East Kazakhstan region - $1.3 billion, an increase of 72.8 percent.
The Netherlands remains Kazakhstan's largest foreign investor investing US$3.3 billion in this period followed by the United States ($2.1 billion) and Switzerland ($1.3 billion).
Source: National Bank of Kazakhstan
Since its independence in 1991, Kazakhstan has attracted more than $376 billion in FDI – on par with some of the most competitive capital destinations globally. There are nearly 37,000 enterprises with the participation of foreign capital registered in Kazakhstan.
Kazakhstan remains the number one investment destination in the Central Asian region, accounting for approximately 70 percent of the total FDI inflows into the region.
Attracting investments and supporting investors has been a priority for Kazakhstan, said President Kassym-Jomart Tokayev during his recent meeting with foreign investors. Kazakhstan set a target to bring the FDI to $30 billion a year and increase the level of investment in fixed assets to 30 percent of GDP by 2025 by further diversifying and increasing the sustainability of its economy.
«Systematic and comprehensive work in this area enabled us to become the largest economy in Central Asia and one of the fastest-growing in the post-Soviet space. (...) Supporting investors is a priority for the state and we have introduced the tailored comprehensive support for every investor,» said Tokayev.
The latest World Investment Report 2021 published by the United Nations Conference on Trade and Development (UNCTAD) also said that Kazakhstan demonstrated good investment activity in 2020 despite the economic consequences stemming from the COVID-19 pandemic. While global flows of foreign direct investment fell by one-third to $1 trillion, Kazakhstan’s FDI inflows increased by 35 percent to $3.9 billion.
By the end of 2020, the gross inflow of FDI in Kazakhstan was $17.1 billion, according to Kazakh Invest national company that serves as a single negotiator between investors and the government.
«The data of the UNCTAD report demonstrates that favorable conditions for foreign investors remain in Kazakhstan against the background of the negative impact of the pandemic on the global economy. The country’s consistently high positions in international rankings, as well as statistics on attracting FDI, confirm the high investment attractiveness of Kazakhstan, and the motivation of investors to start and continue to implement projects, even during a crisis period,» said the Kazakh Foreign Ministry.
Kazakhstan was one of the three countries among the transition economies of South-East Europe, the Commonwealth of Independent States (CIS), and Georgia whose economies witnessed FDI growth. Overall, FDI flows to the transition economies declined by 58 percent to $24 billion in 2020, the lowest since 2003.
The FDI growth in Kazakhstan was largely driven by increased investment in mining, transport, financial services, telecommunication, and energy that compensated for decreasing investment inflows in construction, metallurgy, and trade.
The majority of these FDI came from the country’s huge hydrocarbon projects, including the Tengiz megaproject that Kazakhstan is implementing with Chevron scheduled to be completed by 2022.
«In international project finance deals, the Kazakhstan QazTechna bus manufacturing plant project – involving Chinese capital – became operational at the end of 2020. Also involving Chinese capital was the construction of the DoubleStar rubber and tire factory, which started in 2020. In telecommunication, the Netherlands-based VEOL (VimpelCom) (Russian Federation) launched a new project,» said the report.
Addressing the Kazakhstan Global Investment Roundtable on December 7, Deputy Prime Minister - Foreign Minister Mukhtar Tileuberdi said that Kazakhstan keeps the course on a clean, innovative, and diversified model of the economy.
«Most importantly, we have earned our place in the world as a strong and reliable modern state with advanced and predictable institutions,» said Tileuberdi.
The one-day forum gathered more than 400 on-site, as well as more than 1000 online participants, including members of the government and state organizations, representatives of local business, heads of multinational companies and international organizations, major investors, and world experts from more than 50 countries of the world.
Tileuberdi also reaffirmed the government’s commitment to continuing the improvement of the internal investment climate in accordance with the best international standards.
Reforms in investment system
Building on many years in investment development, the nation significantly reorganized the internal investor support system.
Kazakhstan set up a three-level system to attract more investors – the external level at the country’s embassies; the central level overseen by the government, Kazakh Invest and national companies; and the regional level.
In 2017, Kazakhstan became an associate member of the OECD Investment Committee and joined the declaration on international investment and in April 2019, Kazakhstan created the Coordination Council chaired by the Prime Minister.
In 2021, Kazakhstan also introduced the Strategic Investment Agreement tool that allows strategic investors to directly conclude an investment agreement with the government.
«The investment agreement also provides stability of legislation for the investors for 25 years from the date of its conclusion,» said Tileuberdi.
Since the beginning of this year, Kazakh Invest supported the commissioning of 45 investment projects worth $3.5 billion creating more than 4,000 jobs have been created. The projects are in the agro-industrial complex, mining and metallurgy, renewable energy, machine building, pharmaceuticals, production of construction materials, and light industry.
More than 50 investment projects are planned for 2022.
Promising areas for investments
While Kazakhstan has relied significantly on investments from the oil and gas sector, particularly its rich Tengiz, Kashagan, and Karachaganak fields, it stands firm now in its ambition to develop a knowledge-based economy driven by investments in areas producing high value-added goods and services.
«Today, modern Kazakhstan offers exciting new opportunities across various sectors backed up by favorable business environment. In recent years, our country has been attracting capital into the new innovative projects producing high value-added goods and services. The food processing industry, tourism, and alternative energy continue demonstrating significant potential,» said Kazakh Invest Chair Meirzhan Yussupov.
Foreign investors note the country’s potential to develop renewable energy projects that support Kazakhstan’s ambition to increase the share of renewable energy sources to 30 percent by 2030 and achieve carbon neutrality in the energy sector by 2060.
«Global initiatives such as the Paris Agreement or the recent COP26 in Glasgow are good examples of awareness-raising. Climate change is a serious threat to the quality of life of humanity. But nevertheless, this is a great opportunity. People, companies, countries working in this direction undoubtedly play a leading role, guiding society in a sustainable way,» said the head of Goldbeck Solar Joachim Goldbeck, whose company has built Saran solar power plant with a capacity of 100 MW in 2018, Akadyr I with a capacity of 50 MW in 2019 and Akadyr II with a capacity of 26 MW in 2020 in Karaganda region.
He noted that Kazakhstan could become a «beacon for sustainable investments that will strengthen its position among 30 developed countries - exporters of clean energy and environmentally friendly products.»
Besides the renewable energy sector, the IT industry and fintech are also of big interest to investors in Kazakhstan.
Last year’s listing of Kaspi.kz fintech firm on the London Stock Exchange, where the total deal size of the offering ranged between $742 million and $879 million and the company sold $1 million of its shares with a market capitalization of $6.5 billion, was a significant factor encouraging potential investors to consider investing in the country’s fintech sector.
Kazakhstan also boasts significant human capital and resources in the IT industry.
Forecast to return to pre-pandemic levels
In an interview for this story, Kazakh Invest cited the UNCTAD report that forecast the transition economies, including Kazakhstan, to rebound their pre-pandemic FDI inflows no later than 2022.
«The decline in FDI on a global scale was a serious test for the world economy. (...) Despite the negative impact of the COVID-19 pandemic on the global economy, Kazakhstan has shown the greatest increase in net FDI, ranking first among the 17 countries with economies in transition and 34 landlocked countries,» said Kazakh Invest.
The measures taken by the government to stimulate FDI and new tools to support investors play a crucial role in helping the economy to recover and rebound to pre-pandemic investment indicators.
In doing so, the company noted the importance of ESG principles in investments, which include the environment, social development, and corporate governance.
Written by Assel Satubaldina