250 billion US dollars of foreign investments has been raised by Kazakhstan for the last 10 years | FinReview
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30 July 2019

250 billion US dollars of foreign investments has been raised by Kazakhstan for the last 10 years

In Kazakhstan the intensive work on creation of favorable investment climate is carried out. The special economic and industrial zones, the institutes of development, the financial organizations and the legal framework have given the start to the new impulse for development of national economy. In 2019 the launch of 103 domestic and foreign projects is planned.

The investment attractiveness of the country directly depends on the created infrastructure of support of domestic and foreign investors. The policy of business and investors registration procedures simplification, which is pursued in Kazakhstan, allowed Kazakhstan to level up the position in the annual rating of the World Bank. So, in the report of Doing Business for 2019 the position of Kazakhstan improved from the 36th to the 28th place (among 190 countries of the world), at the same time regarding the “Registration of Enterprises” category  the position rose by 5 lines and reached the 36th place.

According to the report, the essential positive effect on regulation of business was exerted by the “single window” program for investors and by the simplification of trade policy due to the implementation of ASTANA-1 customs declaring electronic system. At the same time the publication of judgments on commercial affairs facilitated the execution of contracts in Kazakhstan.

Direct foreign investments (DFI) raised 320 billion US dollars for years of Kazakhstan independence. At the same time 250.2 billion US dollars came to national economy for the last 10 years. This trend reflects the efficiency of investment policy. The largest volume of direct foreign investments arrived in 2012 – 28.9 billion US dollars, in 2011 – 26.5 billion US dollars and in 2018 – 24.3 billion US dollars.

On the first quarter of 2019, the gross inflow of direct foreign investments to Kazakhstan was 6 billion US dollars (in the previous year it was 6.7 billion US dollars). In general, in 2018 the volume of direct foreign investments reached 24.3 billion US dollars, that is 15.8% more than in 2017 (21 billion US dollars). The inflow share of direct foreign investments from gross domestic product also increased from 12.9% in 2017 up to 14%. At the same time by 2022 the Government of Kazakhstan plans to bring the ratio of gross direct foreign investments volume to gross domestic product to 19%.

In the industry section the largest volume of direct foreign investments in 2018 was aimed to the mining industry and the development of pits – 13.6 billion US dollars. The investments into processing industry and also into wholesale and retail trade were 3.4 and 3.3 billion US dollars, respectively. At the same time the TOP-5 industries included the financial and insurance activities – 1.3 billion US dollars, and the transport and warehousing – 786 million US dollars.

The Government of Kazakhstan carries out the work on diversification of economy, which is aimed to the decrease of raw dependence. The policy of the country had a positive impact on investment flows – in 2018 the share of investments in financial and insurance activities increased from 1.9% up to 5.4%, the share of investments in professional, scientific and technical spheres increased from 0.9% to 2.8%, and the share of investments in construction increased from 1.6% to 2.4%.

With the participation of foreign capital in 2018 27 projects at the amount of 3.1 billion US dollars were put into operation, which allowed to create 6 thousand new job vacancies. The majority of projects are implemented in Almaty region – 27 projects at the amount of 4.1 billion US dollars, in Karaganda region 15 projects at the amount of 2.1 billion US dollars and in Nur-Sultan city 12 projects at the amount of 4.1 billion US dollars are implemented. In 2019 it is additionally planned to provide putting into operation of 27 projects and to raise about 100 new investors.

One of the main instruments of investment raising and export development is special economic and industrial zones (SEZ, IZ). The operation of special economic zones is usually aimed to the implementation of open economy principles due to the liberalization and activation of external economic activity. Their advantages are the special customs, tax and exchange rate regimes.

It should be noted that the package of preferences and privileges is unique for each special economic and industrial zones separately. At the same time it is more unique for participants of customs and tax privileges in special economic zones.

At the moment 12 special economic zones operate in 11 regions of the country. Three special economic zones were established in 2017 – 2018 (“Astana Technopolis”, “Turkestan” and “Khorgos” International Center of Boundary Cooperation”).

The infrastructure construction of all special economic zones cost to the budget of the country 314.3 billion KZT. As of the end of May, 2019 in the territories of special economic zones 183 projects are launched, among them 46 projects are with foreign participation. The volume of raised investments reached 910 billion KZT.

The operation of special economic zones exerted the positive effect on the development of national economy – 15.5 thousand new job vacancies were created, 150 billion KZT of tax revenues are raised. At the same time the investment preferences also draw attention of foreign investors, the share of their participation in projects is 27%.

The most effective work on investment raising is carried out in “Ontustyk” special economic zone – 15.5 KZT of investments are raised for 1 budgetary KZT. The total amount of investments since 2005 is 77.5 billion KZT. The activity of special economic zone is focused on the growth of domestic consumer market and the organization of export-oriented production of textile products.

The “Seaport Aktau” special economic zone is at the second place by efficiency – 15.4 KZT of investments are for 1 budgetary KZT. Also the TOP-3 includes “Pavlodar” special economic zone, which has raised 12.3 KZT for 1 KZT of investments.

By 2021 in the territories of special economic zones it is planned to implement 147 projects for the total amount of more than 2 trillion KZT, among them 36 projects at the amount of more than 160 billion KZT are prepared for launch in 2019.

To develop the small and medium businesses and also to stimulate the production, 23 industrial zones are established in 9 regions of the country. At the moment 168 production projects are implemented by them, which provide 8.5 thousand units of job vacancies.

The state costs for industrial zones infrastructure were 85.9 billion KZT. The amount of raised investments reaches 183 billion KZT. Thus, 2.1 KZT of investments are raised for 1 invested budgetary KZT.

By 2021 in the territory of industrial zones it is planned to implement 173 projects at the amount of about 520 billion KZT. In 2019 40 projects for the total amount of about 163 billion KZT are prepared for implementation.

In Kazakhstan the special attention is paid to the policy strengthening of Kazakhstan goods promotion in foreign markets and also to the efficiency increase of domestic market protection against low-quality import goods. This policy is aimed to further integration of Kazakhstan economy into the world one. For this purpose on June 17, 2019 the President of Kazakhstan signed the Decree “About Measures for Further Improvement of Public Administration System of the Republic of Kazakhstan”, according to which in Kazakhstan the Ministry of Trade and Integration is established.

The functions and powers of the Ministry of National Economy in the field of formation and implementation of domestic and foreign trade policy, international economic integration and consumer right protection; of the Ministry of Industry and Infrastructural Development in the field of technical regulation, standardization and measurement assurance; and of the Ministry of Foreign Affairs regarding the coordination of activity in the sphere of export promotion were transferred to the new Ministry.

The policy of the country regarding the support of domestic investors is aimed, first of all, to the development of national economy and the growth of welfare of the population. For implementation of this purpose the institutes of development, the subjects of quasi-public sector and the representative offices of international financial organizations are established, which are able to structure the financing of investment projects efficiently. “Astana” International Financial Centre, Development Bank of Kazakhstan, KazakhExport, Kazyna Capital Management, Kazakhstan Project Preparation Fund, Astana Hub, “Damu” Fund, QazTech Ventures and etc. are among such companies.

The support of large and medium businesses is provided by means of loan financing, subsidies, shared financing, guarantees and insurance, leasing, consulting project support, export and pre-export financing. For small and medium businesses the following types of support are provided: subsidizing, grants, consultation, venture financing and competences development.

Summarizing the results of 2018, the Development Bank of Kazakhstan financed 63 projects for the total amount of 5.3 trillion KZT. The KazakhExport gave insurance support of exporters at the amount of 90.2 billion KZT and provided the trade and pre-export financing at the amount of 10.3 and 6.9 billion KZT, respectively. The “Damu” Fund supported 22.4 thousand projects of small and medium businesses at the amount of 495 billion KZT, and within the “Business Road Map” program 2.7 thousand projects are received the subsidizing and financing.

The enterprises, which were supported by “Baiterek” NMH” JSC, sold the products at the amount of 2.1 trillion KZT for 2018. On the other hand, the volume of tax payments was 278.1 billion KZT.

In general, the share of product release by the subjects of small and medium businesses in gross domestic product in 2018 was 44.4% (in 2017 – 39.8%). In total, the businessmen sold the products at the amount of 26.5 trillion KZT. At the same time 68.8% of products are produced by small enterprises, 19.6% of products are produced by medium business and 11.6% of products are produced by individual entrepreneurs and peasant farms. In the subjects of small and medium businesses 3.3 million citizens of Kazakhstan are employed among 8.7 million employed people.