ASTANA – Kazakhstan is Central Asia’s recognised leader in terms of investment attraction: this country accounts for more than 70 percent of all foreign direct investments into the region.
The world market is volatile, however, and any slump in demand for ores and metals, along with a decrease in world oil prices, may entail a notable outflow of foreign capital.
Therefore, it is crucial to have a clear understanding about the ways of building better business relations with international companies so they continue investing in the national economy.
To improve the investment climate in Kazakhstan, the country’s President has created a national company, Kazakh Invest, tasked to be the sole negotiator between the government and international businesses. For the same purposes, the government also drafted the National Investment Strategy for 2018-2022 that is about providing investors with comprehensive support.
“Our company has created a network of foreign and regional representative offices to help investors domestically and internationally in the procurement of permits and interaction with local and central executive authorities,” said Marat Birimzhan, the deputy chairman of the board of Kazakh Invest.
The work scope is massive. At the beginning of the year, the company created a list of 145 projects with participation of foreign investors, which envisages the creation of nearly 35,000 jobs. To this date, 31 projects have been added to the list. The total value of the investment projects amounts to $45.7 billion.
In 2018, local administrations and stakeholders are planning to start the implementation of 52 projects worth nearly $5 billion. It is scheduled to commission 50 projects totaling $3 billion.
Indeed, it is important not only to attract investors with interesting proposals, the company believes, as its work does not end there. It is also crucial to create comfortable conditions for their work, the company executives say. For example, this year, the company is launching an informational and monitoring system that will monitor the project process, to interact with foreign companies and government bodies. It will help oversee the project’s stages and timely identify emerging issues.
“The full launch of the system is scheduled for the first half of the year. The system will be accessed by all governmental agencies, foreign institutions, and local administrations. Our mission is to coordinate the work in different regions of the country. Besides, investors will be able to use this system to monitor the resolution of issues relating to their projects,” said Birimzhan.
“We will apply the urgent response principle to ensure timely problem solving, like an ambulance. To this end, we are planning to strengthen the institution of the Investment Ombudsman and to open the All-Kazakhstan Call Centre in the first half of the year, which will operate 24 hours a day, seven days a week. The main goal is to resolve any issues posed by investors – even if it is about registering family members in the migration service or finding schools and hospitals,” Birimzhan explained.
Attracting foreign investors is undoubtedly a complicated process. It requires creativity, in-depth knowledge, experience and comprehensive approach. The analysis conducted by Kazakh Invest specialists identified 11 priority countries that account for almost 80 percent of all direct investments in the world. Kazakh Invest intends to establish close cooperation with these countries regarding their intention to invest in the economy of the Central Asian region.
Each priority country or group of countries will be assigned its own “country strategy.” The representatives of Kazakh Invest look for promising companies that plan to expand their presence in the region in the next five years and propose to them Kazakh projects. For the successful implementation of the “country strategy,” the company has hired local experts in the countries such as the United States, Germany, France and Turkey. It has also engaged special companies that provide support to investors.
“Working in Kazakhstan, foreign investors particularly value the country’s political, economic and social stability. Surely, they are also attracted by Kazakhstan’s strategic location in the heart of the Eurasian continent, which contributes to the optimal logistics chain for the export of finished products to neighbouring countries, such as Russia, China and Central Asian countries,” Birimzhan said.
In fact, most foreign investments have been made into extractive sectors for a long time. Companies were mainly interested in our raw materials. Today, however, Kazakhstan intends to increase the capital inflow to the value-added sector.
“We have identified the first-priority sectors and branches of economy for attraction of new investments. They are food industry, deep processing of oil, gas and minerals (metallurgy, chemistry and petro-chemistry) and mechanical engineering. When searching for investors and planning projects, we focus on these sectors. In the future, the priority sector list may be supplemented with ICT, tourism and finance. However, if an investor wants to build a pharmaceutical plant or a garment factory, that investor will receive the same attentive support,” said Birimzhan. “Besides, we develop projects with estimated profitability and risks that could be attractive for potential investors, including local ones.”
The company’s high-priority portfolio offers 50 projects, which are ready for implementation and worth nearly $20 billion. Their descriptions have been sent as business proposals to embassies and foreign representative offices. “We already see the first results – potential investors have shown interest in some projects and negotiations have begun. In 2018, it is planned to add about 100 projects to the list of proposals for businesses,” the executive explained.
“We sometimes hear concerns that foreign investors are given priority over local businesses. In fact, foreign companies that plan to start a business in Kazakhstan have to look for a local partner in the first place. For Kazakh entrepreneurs, this cooperation offers an opportunity to embrace new innovative technologies and improve the skills of their employees,” said Birimzhan.
Most importantly, the products made in Kazakhstan will be able to enter the international markets faster thanks to the opportunities offered by foreign partners. A classic example: one of the largest groups in Europe – Polpharma – bought the share of Khimfarm in Shymkent by investing $100 million dollars, built three large plants and began exporting its products. As a result, the winners are the local investors, because the project attracted highly skilled staff, technologies, and money.
According to Birimzhan, successful work with foreign investments improves the country’s credibility and helps it attract new investors.