The share of equity in the financing of domestic enterprises has increased from 58% to 73% within 5 years. The reason was the sharp reduction of borrowings in 2017, which was caused by the decrease of foreign funding by 77.4%. However, the investment policy of Kazakhstan showed the positive dynamics according to the results of the first half of 2019, in particular the loans of non-residents reached the level of 37.6%. For comparison, during the same period in 2018 the indicator was 32.8%.
Under the conditions of world economy globalization the investments are the fundamental factor for achieving of sustainable economic development of the country. Over the last 5 years the investment policy of Kazakhstan has ensured the average annual growth of investments in fixed capital at the level of 12.8%.
The domestic companies systematically strengthen the financial stability – the volume of investments in fixed capital in 2018 reached 11.1 trillion tenge, among them 8.1 trillion tenge were raised from own funds of enterprises. In other words, the financing of investment activities of enterprises consists of own assets by 73%. For comparison, in 2014 the own investments accounted for 58% of the total volume of investments.
According to the results of the first half of 2019, the volume of investments amounted to 5.3 trillion tenge, among them 4.4 trillion tenge were raised from own funds of enterprises.
The main reason for growth of project financing due to equity is the reduction of share of borrowings, which have decreased by 30% over the last 5 years. At the same time, the sharp spike occurred in 2017, which was caused by the decrease of loans of non-residents for the year by 77.4%.
Currently the public policy shows the gradual improvement of situation with foreign loans. Thus, according to the results of the first half of 2019, the volume of loans of non-residents reached 101.8 billion tenge, which amounted to 37.6% of the total volume of borrowings. For the same period in 2018 the indicator was 32.8%.
The key measures of the Government for development of investment attractiveness of the country for the first half of 2019 are:
- the establishment of the Investment Attraction Coordination Council;
- the appointment of the Prime Minister A. Mamin as investment ombudsman for coordination and effective interaction with investors;
- the transformation of “Astana” International Financial Centre into a regional investment hub;
- the strengthening of legal framework, in particular, the proposals regarding the assurance of law supremacy and the protection of investors’ rights are made together with the General Prosecutor Office and the Supreme Court;
- the simplification of visa and migration regimes with the introduction of modern digital technologies.
In the context of changing market conditions the development rates of domestic companies are limited due to the reduction of opportunities for additional increase of assets. The share of banking sector lending in the total volume of investments, according to the results of 2018, amounted only to 6.8% (in 2017 – 7.4%). For comparison, in the developed countries this indicator varies from 20% to 30%.
The largest amount of investments goes to the industrial sector. Thus, according to the results of the first half of 2019, the Atyrau region raised 2.1 trillion tenge. Next, regarding the volume of investments Nur-Sultan and Almaty megapolises, which raised 359.3 billion tenge and 331.5 billion tenge, respectively, are included in TOP-3 regions. The listed regions collectively generated 53.4% of investments.
At the extended meeting of the Government of Kazakhstan the Prime Minister A. Mamin set the goal of annual increase of investment volume in fixed capital on average by 20%. In order to achieve this goal within 5 years it is necessary to raise 30 trillion tenge of investments. Considering that the pool of projects in the amount of 12.4 trillion tenge has already been determined, the Government needs to raise on average 3 trillion tenge of investments annually.
As of the first half of 2019, the volume of external investments reached 1.9 trillion tenge and increased by 39% compared to the same period in 2018.
By 2025 the Government of Kazakhstan plans to increase the annual volume of direct foreign investments from the current 24 billion US dollars to 34 billion US dollars. In order to implement this task, on July 30, 2019, the Roadmap for further attraction of investments into the Republic of Kazakhstan was approved by the Government resolution. The Roadmap consists of 19 events, such as:
- the inclusion of provisions of advisory nature in the model contract (for the implementation of investment project) regarding the applicable contract law, the law of “Astana” International Financial Centre and the law (arbitration) clause of Court of “Astana” International Financial Centre or International Arbitration Centre by making appropriate amendments;
- the addressing of issue with counterparties regarding all contracts, which were concluded and will be concluded, with foreign element of determination as the applicable contract law and the law of “Astana” International Financial Centre, and the use for law (arbitration) clause of Court of “Astana” International Financial Centre or International Arbitration Centre instead of legal or arbitration tribunals of other foreign jurisdictions;
- the pronouncement of concept of draft law regarding the taxation and the improvement of investment environment to the Interdepartmental Commission;
- the addressing of issue of unification of tax incentives in “Astana” International Financial Centre, “Astana Hub” International Technopark of IT start-ups, “NC “Astana EXPO-2017” JSC and “Nazarbayev University” JSC;
- the active involvement of development institutions in the work of direct and portfolio foreign investments attraction, including through the development of competences and the use of project and venture financing instruments, capital markets and private asset management at the “Astana” International Financial Centre site.
The interaction with foreign investors regarding the development of national economy and the improvement of investment environment is carried out through the created platform – the Council of Foreign Investors. The Council consists of heads of 35 major transnational foreign companies and international organizations, such as: European Bank for Reconstruction and Development, Asian Development Bank, Arcelor Mittal, Baker McKenzie and others.
Most economic sectors experience the lack of funds for financing of investments. Their volumes are not large enough, which slows the development rates of national economy and prevents Kazakhstan from integrating into world investment flows. This problem can be solved by the use of potential of stock market for financing of investments.
With the creation of Astana International Exchange (AIX) the Kazakhstan stock market received the new impetus for development of securities market. During the year of operation the Exchange held the listing of securities of 24 organizations, including IPO of “NAC “Kazatomprom” JSC, Eurobonds of the Government of Kazakhstan and shares of foreign issuer Polymetal. The potential of AIX in the near term can play a key role in solving of problem of development and modernization of national production.
During the first half of 2019 the economy growth rates are accelerated from 2.9% to 4.1%. The main sources of growth are such industry sectors as: industry, construction, transport, trade, agriculture and communications. The largest impetus for change of volume index was provided by the construction sector – the growth was 11.1%, by the trade sector – the growth was 7.5% and by the transport sector – the growth was 5.3%.
During the same period the investments of enterprises of the industrial sector amounted to 3.4 trillion tenge, while the volume of produced products reached 14.3 trillion tenge. Compared to the first half of 2018, the actual increase of production amounted to 2.6% (or 1.1 trillion tenge). The increase is observed in 14 regions of the Republic, and the largest growth is recorded in Shymkent city (+25.1%), East Kazakhstan (+12.7%) and Kostanay (+12.3%) regions.
The investment flows into construction reached 52.9 billion tenge, and the volume of the performed construction works was 1.4 trillion tenge (for the same period of 2018 – 1.3 trillion tenge). 117.4 billion tenge are invested in wholesale and retail trade, and repair of cars and motorcycles, and the volume of the released products has reached 16 trillion tenge.
In 2018 more than 100 investment projects in the amount of 1.3 trillion tenge were introduced, which provided more than 13 thousand job vacancies. 27 projects in the amount of 3.1 billion US dollars were implemented with the participation of foreign capital. Also the decisions were made regarding the investment of 39 projects in the amount of 8.6 billion US dollars.
The most large-scale projects include the construction of mining and processing complex in the East Kazakhstan region in the amount of 133.8 billion tenge, railway wheels production complex in the Pavlodar region in the amount of 54.1 billion tenge and ferroalloy plant in the Karaganda region in the amount of 34 billion tenge.
In 2019 it is planned to introduce about 120 projects in the amount of 1.1 trillion tenge with the creation of 20 thousand permanent job vacancies.