Opportunities And Risks for Investment in Kazakhstan

Kazakhstan is a resource-rich country in Central Asia that arguably has the most lucrative opportunities for foreign investors. According to the World Investment Report, Kazakhstan attracted foreign direct investment (FDI) worth around $28 billion in 2022, an increase of 18% from 2021. Kazakhstan is the largest recipient of FDI in Central Asia and the second largest in the Commonwealth of Independent States (CIS) region, behind Russia. 

Kazakhstan has the largest economy and the most abundant natural resources in Central Asia. The mining sector, especially oil, gas, and uranium, accounts for almost half of FDI inflows, followed by transport, financial services, telecommunications, and energy. Kazakhstan aims to diversify into renewable energy, metallurgy, agriculture, mining, and other sectors. 

Kazakhstan has a favorable investment climate that ranks 25th out of 190 in the World Bank's Ease of Doing Business Report 2020. Kazakhstan performs well in protecting investors, ranking 10th. Kazakhstan also has a stable sovereign credit rating of BBB-/A-3 by S&P. The country has adopted several measures to attract foreign investors, such as offering investment residency status, a five-year multi-entry visa, and tax incentives for certain projects. Kazakhstan also benefits from its strategic location and participation in China's Belt and Road Initiative.

One of the main incentives for foreign investors in Kazakhstan is the establishment of 13 Special Economic Zones (SEZs). Some of the SEZs are: Astana International Financial Centre (AIFC), which aims to become a leading financial hub in Central Asia that operates under English common law and offers access to capital markets, Islamic finance, fintech, green finance, and dispute resolution services; Khorgos-Eastern Gate is a multimodal transport and logistics center on the border with China; Pavlodar, a petrochemical cluster; and Turkestan, a cultural and spiritual tourism destination.

However, Kazakhstan's economy is highly dependent on the export of commodities, mainly oil and gas, accounting for more than 80%. This makes the country vulnerable to external shocks and oil price drops. Its currency and inflationary pressures remain high as the Kazakh tenge (KZT) has depreciated by an average annual 14% in 2014-2022, and inflation has exceeded the central bank's target range of 4-6%. Kazakhstan faces regional instability due to its long border and close economic ties with Russia, which is involved in a conflict with Ukraine.

By Mr.Sarawut Thiramanit, Dr. Prachaya Suwanhirunkul

Enterprise Thailand