Flowing to an “oasis of stability”
Kazakhstan is emerging as a key investment opportunity as the nation spreads its wings economically and enters a new phase of its political development under President Kassym-Jomart Tokayev.
Businesses including satellite company OneWeb and US technology group Honeywell have recently begun operations in the country, while international investors Franklin Templeton, VPE Capital and Vedra Partners are among a growing number of firms targeting the nation, in marked contrast to the flight of Western capital from Russia due to the war in Ukraine.
According to a new report from The Chamber of International Commerce of Kazakhstan, international investors have injected more than $380bn into Kazakhstan since it declaredindependence from the former Soviet Union 31 years ago – 70% of the total investment flow into the Central Asian region during that period.
Foreign direct investment in Kazakhstan reached $7.58bn – its highest level for a decade – in the second quarter of this year.
Last year, exports to the EU, Kazakhstan’s largest trading partner, totalled $20.5bn, according to the United Nations COMTRADE database, and there are now more than 4,000 companies with European connections operating in Kazakhstan.
Foreign trade grew by 41% to US$51bn in the first five months of 2022, according to the Kazakh Bureau of National Statistics, while trade with the UK at US$1.8bn was up 66% in the first seven months of this year.
Entitled “Is now the time to invest in Kazakhstan?” the Chamber of International Commerce report says international investors are increasingly positive on the country, with President Tokaev’s economic and political reform programme addressing many longstanding concerns about the previous Nazarbayev regime.
It finds that a robust legal system, including the rule of English Common Law in the Astana International Financial Centre and an industrial and business base diversifying beyond abundant natural resources are making the country ever more investable.
In addition to the continued opportunities in the country’s oil, gas and minerals sectors, it cites a growing service economy, innovative science and technology-based start-ups and an expanding role as a regional centre for aviation, education and financial services.
Kazakhstan also boasts 23 million hectares of arable farming land, making it the sixth largest wheat exporter globally.
While facing similar inflationary headwinds to many countries globally, the economy is tipped for strong growth and has a young, well-educated population. Michel Danechi, investment partner at Vedra Partners, said: “The macroeconomic fundamentals and the recently announced reforms have definitely put the country on the right track and created a strong basis for investing in Kazakhstan. We are very positive on the proposed reforms but need to see them implemented and maintained for years to come.”
Part of Kazakhstan’s attraction is its geographical position at the crossroads of Eurasia. Last week, The London Stock Exchange hosted “New Economic Diplomacy and Pathways for Investing in Kazakhstan,” where Magzhan Ilyassov, the nation’s ambassador to the UK, said the country was in an exciting place with a new political era in parliamentary and government stability. “We are an oasis of stability surrounded by big powers,” he said.
A separate report from consultants EYhighlights “With the global economy at a crossroads, which way will Central Asia go?” highlighted President Tokayev’s “New Kazakhstan: The Path of Renewal and Modernization” development plan to restructure the economy.
It cites the plan’s key priorities, including raising economic growth and inclusion by promoting economic diversification, developing the private sector, reducing corruption and improving governance.
Last month, a report by Oxford Economics pinpointed Kazakhstan as benefiting from a “brain drain”, with an estimated 200,000people leaving Russia for the nation and bringing immediate benefits to its economy.