Kazakhstan aims to become a destination for global investment
The country is conveniently connected to European, Asian and Middle Eastern markets.
Since independence in 1991, Kazakhstan has paid utmost attention to its investment policy as one of the fundamental factors for economic growth and development. This of course makes sense – investments facilitate economic growth, which in turn enables a rise in living standards and social welfare. In just 28 years, the country has attracted over $320 billion of foreign direct investment (FDI).
Today, Kazakhstan has emerged as an important player in the global economy and an attractive investment destination. The largest international trade corridors pass through the country thanks to the consistent efforts on infrastructure development and active involvement in the Belt and Road Initiative. The country’s location enables it to connect European, Asian and Middle Eastern markets, where 65% of the world’s GDP is generated.
Aiming to diversify its economy, Kazakhstan offers vast opportunities across various sectors. These include agriculture, petrochemistry, metallurgy, tourism and pharmaceuticals. The Government has been continuously undertaking measures to ensure a favourable investment climate. For example, 12 Special Economic Zones have been established offering tax incentives. In addition, KAZAKH INVEST supports investment projects as a one-stop shop. Furthermore, the Astana International Financial Centre (AIFC) has introduced English common law principles to the Central Asian region. As such, the country is currently ranked 28th in the World Bank’s Doing Business Index in line with continuous efforts on improving investment climate. Now, the country is aiming even higher.
The results so far have been promising. Accounting for approximately 75 percent of FDI inflow in Central Asia, Kazakhstan saw over $24 billion of investment in 2018.
Over the past five years, the major foreign investors in Kazakhstan have been the Netherlands ($33.8 billion of investment), the United Stated ($19.4 billion), Switzerland ($12.5 billion), China ($ 6.2 billion) and France ($ 4.7 billion). Notably, almost 60% of the investment projects are related to non-extractive sectors, including manufacturing, transportation, trade, as well as financial and insurance services.
Implementation of investment projects is translating into success domestically. Currently, KAZAKH INVEST is involved in 216 investment projects and initiatives worth $42.5 billion that will create around 47,000 jobs. This year, 4 investment projects worth $217 million have been launched with the support of the organization, while 85 projects worth $12.3 billion are being implemented.
Undoubtedly, FDI inflow in Kazakhstan has shown positive dynamics over the past years. However, the overall decline in FDI inflows globally has intensified competition for foreign investments with every country vying for foreign backers. Aiming to keep up the momentum, the Government of Kazakhstan has implemented a new structural approach for investment promotion and facilitation. This includes transferring investment attraction functions to the Ministry of Foreign Affairs, establishing the Coordinating Council on Investment Attraction under the chairmanship of the Prime Minister, and the Foreign Direct Investment Fund with capitalization of $1 billion used for the most promising export-oriented projects.
Additionally, the Government continuously works to improve the investment climate. This primarily includes judicial reforms, digitalization, optimization of public services and the permit system, among other initiatives.
Furthermore, calls have been made to modernise the current legislation. For instance, the Government has recently approved a draft amendment to the AIFC Constitutional Law, which enables AIFC bodies to adopt acts regulating labour relations and procurement procedures. As noted by the Prime Minister of Kazakhstan, Askar Mamin, the new legislative initiatives will facilitate rapid development of AIFC as well as investment attraction and protection.
Ultimately, Kazakhstan is set on the path to improve investment climate and strengthen the country’s position within the global community. The country has ambitious goals to increase gross FDI inflow by 26 percent by 2022 compared to 2016, while the ratio of FDI to gross domestic product should reach 19 percent from the current 16.5 percent. Once the additional investment attraction reforms are implemented, Kazakhstan has every chance to go beyond being the number one investment destination in the region, and be amongst global leaders.
The author is Baurzhan Sartbayev, the CEO of Kazakh Invest