Successfully investing in Kazakhstan

The sanctions against Russia are having an indirect impact on the Kazakh economy. At the very least, Kazakh consumers are now spending more on consumer goods that were produced by foreign companies in Russia before the war began. Disruptions to supply chains are also hampering growth in the Kazakh economy. The rise in energy prices is increasing Kazakhstan's revenues as a supplier of raw materials, even though, for example, crude oil sold to Germany and other countries is transported through Russian oil pipelines.

   

The government forecasts that Kazakhstan's economy will grow by at least 5.3 percent by 2024. According to last year's results, the republic's economy has adapted to the new conditions and embarked on a path of sustainable development. Thanks to the measures taken, the economy grew by 5.1 percent. All major sectors showed positive dynamics: construction – 13.3 percent, trade – 11.3 percent, information and communication services – 7.1 percent, transport services – 6.9 percent, industry – 4.3 percent. 

  

Fixed capital formation increased by 13.7 percent. At the same time, foreign direct investment (FDI) totalled 19.7 billion US dollar in the first nine months of the year, of which more than 11 billion US dollar went to non-resource sectors. Overall, FDI indicators have been among the highest in the past decade for the second year in a row, with annual volumes ranging from 26 billion US dollar to 28 billion US dollar. Kazakhstan leads the CIS countries in terms of total foreign investment inflows.

   

According to the National Statistics Agency, there were 43,000 foreign companies in Kazakhstan as of 1 January 2024. This process is explained by the relocation of companies, as a result of which foreign companies were established in Kazakhstan in 2022-2023. These are mainly companies from Russia and Belarus that see their business threatened by sanctions in Russia. This should be seen in the light of the fact that it is relatively easy to relocate economic activities from Russia to Kazakhstan. The establishment of a Kazakh limited liability company can be completed in three to four weeks. Opening a bank account usually takes a couple of weeks. Local staff previously employed in Russia or Belarus can also be employed in Kazakhstan without a visa. In Kazakhstan, the global flow of goods and money works smoothly, with the exception of disruptions in supply chains. These are the benefits of a common economic space (the Eurasian Economic Union). Kazakhstan can therefore justifiably claim to want to become a hub of economic activity in Central Asia. 

    

It should be stressed that Kazakhstan is not politically neutral on the situation in Ukraine, but has clearly stated that it does not recognise the separatist territories as independent. Recently, all defence exports from Kazakhstan have been banned.

The majority of foreign direct investment continues to flow into the raw materials sector. This is obvious given the rising raw materials prices, especially energy prices. Economic activities related to raw materials attract the most foreign capital. Currently, almost 72 percent of all foreign investment is concentrated in several large oil and gas projects. Investments in mining and processing play a non-negligible role in the context of the inter­national obligation to reduce CO2.

  

Investments in metal production and processing follow. It is also the most important sector for foreign invest­ment in the manufacturing sector. Other important sectors for foreign investors include food, beverages and tobacco production, rubber and plastic production, chemical industry and oil refining. Investments in renewable energies, including hydrogen, which has become a coveted energy carrier of the future within months, also represent a promising investment area.

  

There are ten special economic zones (SEZs) in Kazakhstan, which also offer tax and customs benefits (exemption from corporate tax, land tax, property tax, value added tax for goods consumed in the SEZ, free land lease for ten years).

  

The Astana International Financial Centre also operates in Kazakhstan. The main goal of the organization is to contribute to the sustainable development of Kazakhstan and the region by offering new opportunities for com¬panies and businesses to attract investment, create meaningful and effective projects in the industrial and services sectors, and open up new markets for goods and services.