Kazakhstan attracts $6 billion DFI in 1Q 2019

Kazakhstan has been carrying out intensive work towards a favorable investment climate through establishing special economic and industrial zones, development institutes, financial organizations as well as legal frameworks. 103 domestic and foreign projects are slated for 2019.
Nur-Sultan31 July , 11:58

The country has leveled up in the World Bank’s annual rankings thanks to the support for domestic and foreign investors, simplified business policy and investor registration procedures. So, according to the 2019 Doing Business Report, Kazakhstan holds the 28th position from 190 countries, climbing up from the 36th position. The country also ranks 36th in the Enterprise Registration category.   

The single window program and the ASTANA-1 customs declaring electronic system’s rolling-out resulting in a simplified trade policy have contributed to business regulation as well as the publication of judgements on commercial affairs has facilitated to contracts’ execution.

Direct foreign investments (DFI) have stood at 320 billion US dollars since independence, including investments of 250.2 billion US dollars entering Kazakhstan in the last 10 years, demonstrating the efficiency of the current investment policy. The biggest amounts of direct investment were observed in 2012, 2011 and 2018 - 28.9 billion US dollars, 26.5 billion US dollars and 24.3 billion US dollars respectively.

The gross inflow of DFI to Kazakhstan has made up 6 billion US dollars in 1Q 2019 (last year 6.7 billion US dollars). 2018 saw DFI reach 24.3 billion US dollars, 15.8% over the 2017 figure (21 billion US dollars). The share of DFI in GDP also grew up to 14% from 12.9% in 2017. By 2022 the Kazakh Government projects to raise to it to 19%.

In 2018 the biggest amount of DFI was found in mining and – 13.6 billion US dollars. Investments in the processing industry and wholesale and retail trade stood at 3.4 and 3.3 billion US dollars, respectively. The top 5 industries with most investments flowed included finance and insurance – 1.3 billion US dollars, and transport and warehousing – 786 million US dollars.

Kazakhstan works on economy diversification to steer clear of dependence on raw materials. The country’s policy had a positive impact on investment flows as investments in finance and insurance rose from 1.9% to up to 5.4%, these in professional, scientific and technical spheres grew from 0.9% to 2.8%, and in construction - from 1.6% to 2.4% back in 2018.

Providing foreign capital’s involvement 27 projects for 3.1 billion US dollars were put into use in 2018, allowing for 6 thousand new jobs. Most of the projects are implemented in the Almaty region, followed by the Karaganda region, Nur-Sultan.

One of the main instruments to attract investment and develop exports is special economic zones and industrial zones (SEZ, IZ). The zones usually focus on implementing open economy principles as the liberalization and activation of external economic activities are in place. Their advantages include special customs, tax and exchange rate regimes.

A package of preferences and privileges is unique for each special economic and industrial zone.

Kazakhstan runs 12 special economic zones across 11 regions. Three special economic zones were established between 2017 and 2018 (Astana Technopolis, Turkestan and Khorgos International Center of Boundary Cooperation).

Special economic zones’ infrastructure costs equaled 314.3 billion tenge. As late May 2019 special economic zones have launched a total of 183 projects, including 46 projects with foreign capital involvement. The total amount of investment has reached 910 billion tenge.

Special economic zones have a positive effect on the national economy – 15.5 thousand new jobs have been created, 150 billion tenge of tax revenues have been collected. Foreign investors also fall under investment preferences, with their participation making up 27%.

The Ontustyk special economic zone has been active in terms of investment attraction – with one budgetary tenge attracting 15.5 tenge. Since 2005 the total investment has equaled 77.5 billion tenge. The zone’s work focuses on growing the domestic consumer market and establishing export-oriented output of textile products.

The Seaport Aktau special economic zone comes second in terms of effectiveness with 15.4 tenge for 1 budgetary tenge. The top-3 also includes the Pavlodar special economic zone, which has attracted 12.3 tenge for 1 tenge.

By 2021 the special economic zones are due to carry out 147 projects for more than 2 trillion tenge, they include 36 projects for over 160 billion tenge are slated for 2019.

23 industrial zones have been established within 9 regions so as to develop small and medium businesses and stimulate production. As of today, they carry out168 production projects, providing 8.5 thousand jobs.

The state spending on the industrial zones’ infrastructure has totaled at 85.9 billion tenge. While the amount of investments attracted has equaled 183 billion tenge. Thus, one budgetary tenge attracted 2.1 tenge of investment.

By 2021 the industrial zones plan to carry out 173 projects for around 520 billion tenge. 40 projects for about 163 billion tenge are slated for 2019.

The country’s investment policy primary aims at developing the national economy and raising the wellbeing of the citizens. To that end, development institutes, quasi-public sector subjects and representative offices of international financial organizations are being establishing to ensure proper financing of investment projects. They include Astana International Financial Center, Development Bank of Kazakhstan, KazakhExport, Kazyna Capital Management, Kazakhstan Project Preparation Fund, Astana Hub, Damu Fund, National Technological Development Agency, and you name it.

Kazakhstan pays special attention to a policy strengthening Kazakh goods’ promotion to foreign markets and the effectiveness of protecting the domestic market against low-quality import goods to further integrate the Kazakh economy into the global markets. In so doing, on 17 June 2019 the Kazakh President signed the decree improving the public administration system of the Republic of Kazakhstan, establishing the Ministry of Trade and Integration.

The Ministry was handed over the functions and powers of the Ministry of National Economy in forming and implementing a domestic and foreign trade policy, international economic integration and consumer right protection and these of the Ministry of Industry and Infrastructural Development in the realm of technical regulation, standardization and measurement assurance; as well as these of the Foreign Ministry regarding the coordination of activities in export promotion.

Large and medium businesses are supported thanks to loan financing, subsidies, shared financing, guarantees and insurance, leasing, consulting project support, export and pre-export financing. While small and medium businesses are given the following types of support: subsidizing, grants, consultation, venture financing and competences development.

The 2018 saw the Development Bank of Kazakhstan finance 63 projects for 5.3 trillion tenge. KazakhExport provided insurance exporter support for 90.2 billion tenge and trade and pre-export financing for 10.3 and 6.9 billion tenge, respectively. Damu Fund backed up 22.4 thousand projects in small and medium businesses amount to 495 billion tenge, and 2.7 thousand projects received subsidies and funds in the wake of the Business Road Map program.

The enterprises, sponsored by Baiterek National Managing Holding Company, sold products for 2.1 trillion tenge in 2018, whilst tax payments paid equaled 278.1 billion tenge.

The share of products being released by the subjects of small and medium businesse in GDP was 44.4% in 2018 (39.8% in 2017). All in all, the businessmen sold products for 26.5 trillion tenge, including 68.8% of products produced by small enterprises, 19.6% - by medium businesses and 11.6% - by individual entrepreneurs and peasant farms.

The small and medium businesses employ 3.3 million citizens from the total number of working people of 8.7 million.