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Kazakhstan has sparked a quiet revolution in the global investment environment. It is emerging as an attractive destination for foreign direct investment (FDI). According to estimates by the Kazakh State Company, total FDI inflows into Kazakhstan over the past 30 years amounted to $431 billion. This amount accounts for 70% of FDI inflows to Central Asia.
Photo courtesy of Kazakhstan Investment
Major investors include the Netherlands, the United States, Switzerland, China, Russia, Belgium, France, South Korea, Germany, the United Kingdom, and Japan. Almost half of the investments will come from the European Union, with Shell, Total, Alstom, Eni, Air Liquide and Siemens among the more than 3,000 European companies operating in Kazakhstan.
Muhammad Rafiq
As one of the largest investors, China has invested over $23 billion and supported 52 joint venture projects. In addition to oil and gas, in recent years significant investments have been made in mining, manufacturing, agriculture, wholesale and retail trade, professional, scientific and technical activities, transport and logistics, warehousing, financial and insurance activities, tourism, electricity and It is aimed at other fields. gas supply etc.
Investment in promising and strategically important areas such as rare earth metals and green hydrogen extraction is also increasing. German-Swedish company Svevind has launched a project to install solar and wind power plants in Kazakhstan to produce 3 million tons of green hydrogen. The digitalization sector showed his growth of 12.2%.
The Kazakh government has adopted several policy measures to transform the country into a global investment hub.
• Kazakhstan is rapidly digitizing its public services and currently ranks 28th on the United Nations e-Government Development Index. This progress is linked to the digitization of financial transactions. Non-cash transactions in 2022 amounted to $227 billion, an increase of 42%.
• Kazakhstan has a favorable tax system and has agreements to avoid double taxation with 55 countries.
• Kazakhstan has gained important advantages by connecting to the Digital Silk Road, which includes the Trans-Caspian fiber optic trunk route that passes through the country. This connection has great potential for the development of data storage and processing centers in Kazakhstan.
• The government has established 13 Special Economic Zones (SEZs) in different regions, each with the necessary infrastructure and special legal framework. Each Special Economic Zone focuses on a specific industry that represents a priority sector of the economy.
• Astana International Financial Center (AIFC) offers an independent court, an international arbitration center for expedited resolution of trade disputes, special tax laws, and specific visa and employment regimes for international investors, all of which have a powerful overall impact. Pull FDI.
• Members and partners of the Organization for Economic Development and Cooperation (OECD) are entitled to policy recommendations that prepare them to become benchmarks for trade and investment. In 2017, Kazakhstan became an OECD member and an associate member of the OECD Investment Committee.
• Kazakh Invest, established in 2017, acts as an official investment promotion agency and provides a single-window principle for discussing the prospects and terms of investment projects. This has been an effective catalyst for attracting foreign investment into priority economic sectors.
• Historically, the Kazakh government has attracted large oil and gas sector investors such as TengizChevrOil, KazMunaiGas, and Caspian Pipeline Consortium by providing an investment-friendly environment. The country supports these industries with his three large refineries located in Pavlodar, Shymkent and Atyrau.
• Policy makers understand the importance of an effective regulatory environment for investment and entrepreneurship. Therefore, in 2023 more than 10,000 business requirements were excluded from Kazakh legislation.
• Kazakhstan aims to diversify its economy beyond the oil and gas sector. Agriculture, construction, tourism, pharmaceuticals, ecology and information technology are priority sectors. The government plans to ensure the stability of Kazakh law for 25 years in connection with investment projects of more than $50 million in these priority areas.
• A national pool has been formed to monitor and manage the implementation of investment projects. This includes his nearly 1,000 projects worth more than $69 billion.
• Indirect incentives are Kazakhstan’s commitment to economic modernization, digital transformation and sustainable development, which is consistent with the investment priorities of leading international companies.
• In December 2023, President Kassym-Jomart Tokayev signed a decree strengthening the powers of the Investment Promotion Council and empowering the heads of central and local executive bodies to achieve tangible results in attracting investment through the council’s framework. Assigned responsibilities.
• So far more than 40 foreign companies have successfully relocated from Russia to Kazakhstan. The government has made special amendments to the law for this purpose.
• Another incentive for investors is the existence of several international corridors that cross Kazakhstan. These intermodal transport routes connect Kazakhstan to markets in Asia, Europe, and the Middle East, which together generate approximately 65% of global GDP.
• Switzerland’s International Institute for Management Development (IMD) ranks Kazakhstan 37th among the world’s competitive economies.
• These initiatives demonstrate Kazakhstan’s commitment to fostering an investment-friendly environment. Based on the 2050 Strategy, Kazakhstan is on track to become one of the 30 most developed countries in the world.
The Ukraine war has posed challenges to Kazakhstan’s investment climate, given its long borders and extensive economic ties with Russia, as well as the impact of Western sanctions. However, Kazakhstan has successfully overcome these challenges by consistently aligning itself with Western sanctions against Russia, in accordance with international law and the UN Charter.
The Kazakh government has embarked on an ambitious mission to increase the size of the country’s economy to $450 billion by 2029. Achieving this goal requires $150 billion in FDI by 2029, as outlined in the National Investment Policy. As Kazakhstan continues to improve its legal framework and investment support tools, it is well positioned to achieve its goals and attract investors seeking high profit potential in a rapidly evolving landscape.
Similarly, the Pakistani government has launched an economic revitalization plan to attract investment. For this purpose, the Special Investment Facilitation Council (SIFC) has been established to act as a dynamic single window and ensure seamless facilitation for valued investors. In order to improve Pakistan’s investment ecosystem and achieve desired results, SIFC can gain insight into Kazakhstan’s success story, which can serve as a model in the global investment field.
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 Astana Times.
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