Kazakh Invest explains the cause of record high decline in foreign direct investment in Kazakhstan
According to statistics published by the National Bank, foreign direct investment (FDI) inflows plummeted 30-fold, from $2.3 billion to $72.9 million over the first nine months of 2024. Kazakh Invest, a national company dedicated to assisting foreign investors in Kazakhstan, has described this anti-record as a temporary event, driven by objective economic reasons and cyclical factors.
«Decline in FDI inflows is not related to inefficiencies in investment policy but rather to objective economic factors, including commodity market volatility and investors’ decisions. Taking into account the mining sector’s high share in the FDI structure, these processes are beyond the control of public agencies,» Kazakh Invest said in a statement.
The company explained that Kazakhstan’s National Bank doesn’t disclose the data from international investors reports, citing obligations to the International Monetary Fund (IMF) and national legislation. According to Kazakh Invest, Kazakhstan saw a 98.4% decline in FDI inflows year-on-year (YoY). The company attributes this drop to a 93.4% reduction in reinvested earnings, which could indicate either a net decrease in the income of foreign-owned enterprises or an increase in dividend payouts to international shareholders.
Among other reasons for the FDI plunge, Kazakh Invest cites cyclical factors, including the completion of large-scale infrastructure projects such as Tengizchevroil’s Future Growth Project. However, this shift will allow for a switch to other promising economic sectors that contribute to economic growth. The company claimed that Kazakhstan remains committed to creating favorable conditions for investment.
«Kazakhstan remains attractive to international investors, as shown by its leading investment volume in new projects among Central and North Asian states,» Kazakh Invest claimed.
In 2024, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) reported that Kazakhstan experienced investment projects totaling $15.7 billion, reflecting an 88% increase compared to 2023. Going forward, the focus will be on projects related to the development of renewable energy, agriculture, logistics and digital technologies — sectors that experts believe will help counter the current investment inflow fluctuations.
Gross FDI inflows for the first three quarters of 2024 totaled $12.7 billion, reflecting a 35.7% decline YoY. According to economist Galymzhan Aitkazin, this figure merely reflects international investors’ interest in Kazakhstan’s economy and does not indicate capital outflows.
«The primary reason for the gross FDI inflows decline lies probably in the completion of Tengizchevroil’s Future Growth Project in the Atyrau region, with a total cost exceeding $46 billion. This project significantly contributed to Kazakhstan’s gross FDI inflows over the period between 2016 and 2024. However, the finalization of the active construction phase led to a temporary reduction in gross FDI inflows,» Kazakh Invest elaborated.
KazakhInvest insists that it remains committed to attracting new investments. This statement followed a comment by President Kassym-Jomart Tokayev, who emphasized the need for «an integral ecosystem» to attract «high-quality investments.»
Over the first nine months of 2024, outflow of FDI from Kazakhstan reached $1.5 billion, which is twice as much as in 2023, when the rate stood at $701.5 million. The net FDI remained negative at -$1.6 billion, which was still better than in 2023, when it reached -$3.2 billion.
In August 2023, analysts at the National Bank stated that the FDI effectiveness indicator overlooks capital outflows, leading to an incomplete picture of investment flows. The regulator noted that gross FDI inflows do not accurately reflect the true state of the investment climate, as they can present stable positive figures without accounting for actual fund outflows from the country.
Russia has been the biggest foreign direct investor for Kazakhstan since 2023, securing inflows totaling $931.9 million over the first six months of 2024. However, this figure decreased by 21.4% compared to the same period of 2023. Other big investors contributing to Kazakhstan’s FDI include Singapore, Luxembourg, Switzerland and Cyprus, who primarily invest in the trading, financial and processing sectors.
