When there is so much gloom and uncertainty in the world, it is not hard to understand why good news rarely gets the attention it deserves. It is a fact of life – and of the media – that bad news is what usually gets headlines.
And there is no shortage of bad news about the global economy. The movement in growth forecasts is invariably down, not up. Political shocks and risks continue to threaten hopes of a strong global recovery.
Weak growth has, of course, a major impact on commodity demand and prices. Oil and gas producers – both countries and companies – are having to adjust to falling revenues. This has led to investment decisions made in times when demand was greater and prices higher being revisited across the world.
As an open economy and an oil producer, Kazakhstan can’t be immune to these global forces. Their impact has been greater here thanks to our close trading relationships with Europe and Russia, which each have their own economic struggles.
But thanks to the wise policy of saving oil revenues in the good times, the country has provided itself with a financial buffer to ease these difficulties. The government can also take satisfaction from seeing the storm approaching and taking decisive steps to help the country weather its impact.
As we have outlined before, a programme of reforms to ensure both that the country lives within its means and supports economic activity through targeted investment was put in place. The government also kept its eye on the long-term, accelerating the modernisation of Kazakhstan’s critical infrastructure and industries so the country can come through this difficult time better prepared for the opportunities ahead.
While other countries have flirted with protectionist measures and imposed new barriers, Kazakhstan, whose dramatically increased gross domestic product and living standards since independence stand as an example of the benefits of an open approach, has not shifted course. New measures to enhance further Kazakhstan’s investment climate, including fresh tax incentives and stronger legal protections, have been introduced. Our country may be the favoured destination for foreign investment in the region, but there needs to be no complacency.
It is encouraging to see that the latest figures show that these efforts are paying off with a major increase of foreign direct investment into the country in the first half of 2016. At a time when global investment continues to be subdued, Kazakhstan’s $9 billion in FDI is 26 percent higher than for the same period last year.
These decisions by hard-headed businesses are a powerful vote of confidence in Kazakhstan and its future. They show that the country’s stability and location as a bridge between East and West is increasingly attractive for outside investors. New and updated transport connections within our country, for example, which link in with the wider improvements through the likes of One Belt One Road initiative, are proving a new incentive for investors.
But with media attention understandably taken by the problems caused by the slump in oil prices, the long-term attractiveness of Kazakhstan’s rich reserves can be overlooked. This is not a mistake that oil companies, who have survived many price cycles in the past, are making.
The decision this summer by the Chevron-led international consortium to go ahead with the $37 billion expansion of the Tengiz oil field showed that the gloom about the prospects for the industry is overblown. It is a huge long-term investment and the strongest possible sign of faith both in the recovery of the market and in Kazakhstan’s direction.
Now, this investment is coupled with the news that oil production restarted at the Kashagan field in mid-October. Commercial output levels are expected to be reached within the next few weeks, with production predicted to be running as high as 4 million tonnes by the end of next year. As oil prices recover and production continues to increase, Kashagan will prove an increasingly significant contributor to the country.
In the meantime, the coming year will see new developments that will help further boost investment and growth. Kazakhstan’s comprehensive privatisation programme will provide a launch pad for the Astana International Financial Centre. EXPO 2017 will also draw international focus to Kazakhstan and bring a welcome increase in visitors.
In the longer term, an improvement in relations with Russia will make membership in the Eurasian Economic Union and access to its 180 million consumers very attractive. The immediate prospects for the global economy may be uncertain, but Kazakhstan, by continuing to send a strong message that it is open for business, is proving a remarkably resilient destination for foreign investment.