Recent Developments in Kazakhstan’s Investment Landscape

Kazakhstan has stirred a silent revolution on the global investment landscape. It has emerged as an attractive destination for foreign direct investment (FDI). According to an estimate by the Kazakh Invest national company, during the last 30 years, total FDI inflows into Kazakhstan have reached $431 billion. This amount accounts for 70% of the FDI inflow to Central Asia.

Photo credit: Kazakh Invest

The major investors include the Netherlands, USA, Switzerland, China, Russia, Belgium, France, South Korea, Germany, the United Kingdom, and Japan. Almost half of the investment comes from the European Union, with Shell, Total, Alstom, Eni, Air Liquide, and Siemens among the over 3,000 European companies operating in Kazakhstan. 

Muhammad Rafiq

As one of the largest investors, China, with an investment volume of over $23 billion, supports 52 joint venture projects. Besides oil and gas, significant investments have been directed in recent years to sectors such as mining, manufacturing, agriculture, wholesale and retail trade, professional, scientific and technical activities, transportation and logistics, warehousing, financial and insurance activities, tourism, electricity and gas supply, among others.

Investments in promising and strategically important sectors, including the extraction of rare-earth metals and green hydrogen, are also growing. Svevind, a German-Swedish company, has initiated a project to install solar and wind power stations to produce three million tons of green hydrogen in Kazakhstan. The digitization sector has shown a growth of 12.2%. 

Several policy measures have been adopted by the government of Kazakhstan that have transformed the country into a global investment hub.

• Kazakhstan has rapidly digitized its public services, now ranking 28th on the UN e-Government Development Index. This progress is coupled with the digitization of financial transactions. In 2022, non-cash transactions reached $227 billion, marking a 42% increase.
• A favorable tax regime has been implemented in Kazakhstan, along with agreements to avoid double taxation with 55 countries.
• Kazakhstan has gained a key advantage by connecting to the Digital Silk Road, which includes trans-Caspian fiber-optic main routes passing through the country. This connection has tremendous potential for developing data storage and processing centers in Kazakhstan.
• The government has established 13 Special Economic Zones (SEZs) across various regions, each with necessary infrastructure and a special legal regime. Each SEZ focuses on a specific industry, representing priority sectors of the economy.
• The Astana International Financial Centre (AIFC) offers a stand-alone court, an international arbitration center for the prompt resolution of trade disputes, a special tax code, and specific visa and employment regimes for international investors, all of which collectively exert a strong pull on FDI.
• Member countries and partners of the Organization for Economic Development and Cooperation (OECD) are entitled to receive policy recommendations that prepare them to become benchmarks of trade and investment. Kazakhstan became an associate member of the OECD Investment Committee in 2017, having joined the OECD as an accession country.
• Established in 2017, Kazakh Invest serves as the official investment promotion agency, providing a single-window principle for discussing prospects and conditions for investment projects. It has become an effective catalyst for attracting foreign investment into priority economic sectors.
• Historically, the government of Kazakhstan attracted major oil and gas sector investors, such as TengizChevrOil, KazMunaiGas, Caspian Pipeline Consortium, and other companies, by providing an investment-friendly environment. The country supports these industries with three large oil refineries located in Pavlodar, Shymkent, and Atyrau.
• The policymakers understand the importance of an effective regulatory environment for investment and entrepreneurship. Therefore, more than 10,000 business requirements have been excluded from Kazakhstan’s legislation in 2023.
• Kazakhstan aims to diversify the economy beyond the oil and gas sector. Agriculture, construction, tourism, pharmaceuticals, ecology, and information technology are the priority sectors. The government plans to ensure the stability of Kazakhstan’s legislation for 25 years in relation to investment projects worth over $50 million in these priority sectors.
• A nationwide pool has been formed to monitor and control the implementation of investment projects. It encompasses nearly 1,000 projects worth more than $69 billion.
• An indirect incentive is Kazakhstan’s commitment to economic modernization, digital transformation, and sustainable development that aligns with the investment priorities of leading international companies.
• In December 2023, President Kassym-Jomart Tokayev signed a decree to increase the powers of the Investment Promotion Council, assigning the heads of central and local executive bodies the responsibility to achieve tangible results in attracting investments through the council’s framework.
• More than 40 foreign companies have successfully relocated from Russia to Kazakhstan so far. The government has made special amendments to the legislation for this purpose.
• Another incentive for investors is the presence of several international corridors crossing through Kazakhstan. These multi-modal trade routes link Kazakhstan to the markets of Asia, Europe, and the Middle East, which together generate about 65% of the world’s GDP.
• The International Institute for Management Development (IMD) in Switzerland ranks Kazakhstan 37th among the competitive economies of the world.
• These initiatives demonstrate Kazakhstan’s commitment to nurturing an investment-friendly environment. Under its 2050 Strategy, Kazakhstan is on track to join one of the 30 most developed nations in the world.

The Ukraine war posed challenges to Kazakhstan’s investment environment, given its long borders and extensive economic ties with Russia, as well as the impact of Western sanctions. However, Kazakhstan has successfully navigated these challenges by consistently aligning with Western sanctions against Russia in accordance with international law and the UN charter.

The government of Kazakhstan has undertaken an ambitious task to increase the country’s economic volume to $450 billion by 2029. Achieving this target requires $150 billion in FDI by 2029, as outlined in its National Investment Policy. As Kazakhstan continues to improve its legal framework and investment support tools, it is well poised to achieve its target by attracting investors seeking high-potential returns in a rapidly evolving landscape.   

Similarly, the Government of Pakistan has also launched an economic revival plan to attract investments. For this purpose, a Special Investment Facilitation Council (SIFC) has been established that operates as a dynamic Single Window to ensure seamless facilitation for deserving investors. To improve Pakistan’s investment ecosystem and achieve the desired results, SIFC can gain insight into Kazakhstan’s success story, potentially serving as a model in the global investment arena.

Muhammad Rafiq (Pakistan) is a senior banker based in Kazakhstan with an interest in Central Asian studies.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of The Astana Times. 

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