The global economic crisis that followed the coronavirus pandemic caused valuable assets to fall sharply in many markets. Many investors are wondering what to invest in now, so that after the crisis is over, they can not only save their funds, but also earn money.
The world continues to struggle with the COVID-19 pandemic. Its active spread keeps global markets in chaos, creating daily fluctuations in indices and making it difficult to find safe investment destinations. For example, the USA S&P 500 index lost a fifth of its value during the first quarter of 2020 — its biggest decline since the global financial crisis in 2008.
Tension in world markets persists even with the ongoing measures of economic stimulus from America and Europe, which have already exceeded 10 trillion US dollars. Some investors believe that thanks to these funds, the markets remain active, while others believe that they are not able to revive the world economy, which will continue to decline rapidly. However, investors remain unanimous that now is a good time to capitalize on investment opportunities.
What opportunities do investors have?
As the situation has shown during the recent economic downturns, such as during the currency crisis of 2014-2015, those investors who continued to invest in sagging securities of large enterprises increased their profits several times. This year, this trend is already being observed — an example is the s&P 500, which has already risen by 30% since March.
However, it is important to note that the coronacrisis, characterized by its epidemiological origin and large-scale spread, constrains business activity around the world. To stimulate markets, countries began to actively switch to an innovative economy. Consequently, this trend has updated the priority areas for investment. E-Commerce, telecommunications, IT-technologies, medicine, e-education, manufacturing, agro-industrial complex, logistics, artificial intelligence, financial technologies, and insurance are now gaining popularity.
Which Kazakhstan projects have already attracted investors in 2020?
To begin with, it is important to note that the global inflow of foreign direct investment is expected to decrease by more than 30% in 2020.
This trend is already observed in Kazakhstan — by the end of the first quarter of 2020, our country attracted 3.6 billion us dollars of foreign investment, which is 2.8 billion US dollars less than in 2019.
The funds are mainly used for the production of crude oil and natural gas (2.1 billion US dollars), wholesale and retail trade (552.7 million US dollars), pipeline transportation (244.8 million US dollars), metal ore mining (213.1 million US dollars), metallurgy (206.7 million US dollars) and financial services (187.6 million US dollars).
In some sectors of the national economy, Kazakhstan has even increased investment flows in comparison with the first quarter of 2019. For example, investment in food production increased by 64.6 million US dollars, in fuel wholesale by 20.3 million US dollars, and in water and sewer systems by 16.1 million US dollars.
However, there is a decline in investment income in the main areas. Thus, investments in oil and natural gas production decreased by 1.2 billion US dollars, in the metallurgical industry-by 714.9 million US dollars, and in financial services — by 411.7 million US dollars.
Nevertheless, Kazakhstan is already working to increase investment revenues to the country. Within five years, it is planned to implement more than 2 thousand investment projects totaling 44 trillion tenge. Agreements have already been reached on some of them. For example, in the second half of may, a contract was signed with the company “KAZ solar 50”, under which a project in the field of renewable energy sources in the territory of the Karaganda region will be implemented jointly with the German company Solarnet Investment GmbH. The project cost exceeds 5 billion tenge.
Another major project that is being implemented with the attraction of foreign investment is the construction and operation of the great Almaty ring road with a length of 66 kilometers. The project cost is 737 million US dollars, which is invested by the Turkish company Alarko Holding.
At the same time, the investor is also considering new projects for financing in our country. The priority area for it is the sphere of renewable energy sources. For Kazakhstan, this industry has become one of the most attractive investment areas. The country is already implementing 19 projects totaling 1.1 billion us dollars. At the same time, 9 projects are planned to be completed by the end of 2020.
The largest international financial institution of the US Government — International Development Finance Corporation-has also expressed the expansion of investment cooperation with Kazakhstan this year. His areas of interest are infrastructure, energy and telecommunications.
However, it is already becoming more difficult for businesses to attract investment, as in the global economic downturn, investors are wary of potential projects and often withdraw capital from emerging markets. Financial institutions that develop the market by offering access to Finance in various formats can help businesses attract investment.
In Kazakhstan, such an institution is the “Astana” international financial centre
Fincentre is a market mechanism that helps manage global cash flows, attract investment, and create new financial products. It is designed to support the diversification of the national economy, which means that both companies in the financial sector and other sectors of the economy can work in its ecosystem.
The created favorable tax regime and operating incentives help companies reduce costs, thereby increasing their competitiveness and making the cost of doing business more attractive. A separate jurisdiction, a legal framework, a court with the involvement of professional foreign specialists, and the Astana International Exchange stock exchange should become a new impetus for the arrival of investors.
The first success of the AIFC in attracting investment is already there. More than 180 million US dollars of investment funds were transferred to the economy of Kazakhstan through the financial centre, and the companies raised 290 million US dollars in equity through the AIX stock exchange. This is significantly higher than the same indicators for Kazakhstan over the past three years.
Another important point is that more than 63 thousand investor accounts have been opened in the Central Depository of the AIX exchange. This indicates the interest of private investors in the instruments of the financial centre.
The national investment company Kazakh Invest also operates in the country
The national company, working on the principle of “one window”, provides support to investors at all stages of the project implementation. By the end of 2019, with the support of Kazakh Invest, 40 projects with the participation of foreign investors in the amount of 1.1 billion US dollars were commissioned and construction and installation works on 21 projects in the amount of 3.4 billion US dollars were started.
To date, the Kazakh Invest monitoring system has more than 170 investment projects totaling 46.5 billion US dollars, with the creation of about 58 thousand new jobs. The projects cover such priority sectors of the economy as agriculture, light industry, mechanical engineering, petrochemistry, renewable energy projects, logistics, and others.
The development of the investment climate in the country has allowed Kazakhstan to increase its position in the international ranking of ease of doing business
Kazakhstan has improved its position in the “Doing Business – 2020” rating, rising by 3 positions and taking the 25th place. At the same time, the country was ranked in the TOP 5 on the indicator “contract enforcement” and in the TOP 10 on the indicator “Protection of minority investors”.
The creation of favorable and unique conditions for investors allowed to reduce the withdrawal of local capital abroad and accumulate funds in the domestic capital market. For example, in recent years, there has been a significant reduction in the outflow of Kazakh investment. While the total outflow of funds over the past three years was 9.2 billion US dollars, the figure for the previous three years was almost 25 billion US dollars. In other words, Kazakh investors are reducing their investments abroad, switching their attention to the advantages of investing within the country.