Investment slowdown in Kazakhstan: Kazakh Invest explains the causes

Kazakh Invest, Kazakhstan’s national investment promotion agency, has addressed the recent decline in foreign direct investment (FDI) to the country. In 2024, gross FDI inflows dropped by 28%, from $23.9 billion to $17.1 billion. Meanwhile, net FDI turned negative for the first time since records began in 2005, reaching -$2.55 billion.

The agency considers this downturn a temporary phenomenon and says the trend can be reversed, primarily through several planned investment projects.

Why is FDI decreasing?

Kazakh Invest emphasizes that the drop in FDI does not reflect a decline in Kazakhstan’s investment appeal. Instead, it attributes the slowdown to several key factors:

Global economic uncertainty. The agency argues the decline is part of a broader global trend. According to the United Nations Conference on Trade and Development (UNCTAD), global FDI inflows, excluding transit flows through European jurisdictions, fell by 8% in 2024. Developing countries saw an average decrease of 2%, Asia dropped 7% and China experienced a 29% fall, reaching its lowest FDI level in recent years.

Completion of major commodity projects. A significant portion of Kazakhstan’s FDI has traditionally gone to the commodities sector, which accounted for 38% of FDI in 2024. Completing large-scale projects, specifically, the active investment phase of the Future Growth Project at the Tengiz oil field, contributed to the downturn.

Decline in reinvested earnings. Reinvested income dropped sharply by $7.1 billion. This decline may be linked to fluctuations in global commodity markets, reduced profits among key investors or decisions by foreign companies to distribute profits as dividends instead of reinvesting. Kazakh Invest notes that this is a private decision beyond government control.

At the same time, the agency urges observers to look beyond FDI. Investments in fixed assets reached $41.2 billion in 2024, the highest figure in Central Asia. It highlights a structural shift in the economy: while investment in extractive industries is declining, funding for diversification and new infrastructure is on the rise.

Should Kazakhstan expect a further decline in FDI inflows?

Kazakh Invest maintains that the recent decline in FDI is temporary, with growth expected in the medium term.

Despite the downturn, 2024 has seen Kazakhstan sign several new agreements with major international companies. These projects represent significant commitments and are expected to drive future FDI growth.

Key new investment projects include:

Polyethylene production plant

Investment: $7 billion.

Commissioning year: 2029.

Partners: KazMunayGas (40%), Sinopec (30%) and SIBUR (30%).

Coal chemical plant

Investment: $4 billion.

Developer: China’s CHN Energy.

Status: Agreement signed.

Industrial park for non-ferrous metal processing

Investment: $12 billion.

Developer: China’s East Hope Group.

Jobs to be created: Up to 10,000.

Major gas infrastructure projects

Investment: Over $10 billion.

Developers: Qazaq Gaz and Qatari UCC Holding.

Projects include the gas processing plant at the Kashagan field, the KS-14 compressor station, the KS-14-Aktobe-Kostanay pipelines and the second string of the Beineu–Bozoi–Shymkent pipeline.

Kazakh Invest noted that Kazakhstan is shifting its focus toward high-value-added industries such as coal chemistry, petrochemistry, deep grain processing and oil and gas equipment manufacturing.

Additional projects underway:

• Singapore Darwin Biotech, corn starch production. Investment: $150+ million.

• Dalian Hesheng Holdings, wheat processing. Investment: $1.5 billion. Construction start: Second quarter (Q2) of 2025.

• Fufeng Group, corn processing. Investment: $1 billion. Construction start: Q2 2025.

According to the UN Economic and Social Commission for Asia and the Pacific (ESCAP), Kazakhstan led North and Central Asia in new investment initiatives in 2024, attracting $15.7 billion, an 88% increase year-on-year.

«This is especially important, as many of these projects are still in the capital deployment phase, laying a strong foundation for future FDI growth,» Kazakh Invest stated.

The agency emphasized that Kazakhstan’s investment strategy is evolving from emphasizing sheer volume to prioritizing structure and quality. Key focus areas include manufacturing, export-oriented sectors and technology transfer. These investments are expected to create jobs, develop value chains and boost knowledge sharing.

To support this transition, the government is rolling out several reforms:

• Digitalization and transparency. A national digital investment platform will be launched, and a formal investor complaint registry will be introduced. Regular «acceleration» sessions to eliminate regulatory barriers will be held.

• Regional investment approach. A new policy framework aims to grow non-resource sectors, tailored to each region’s unique strengths.

• Targeted incentives. Customized incentive packages for investors, including reciprocal obligations for participants in special economic and industrial zones, are being introduced.

• Green corridor. Strategic projects to enjoy reduced bureaucracy and faster approval timelines.

Kazakhstan currently ranks 39th on the Global Attractiveness Index and is among the top 35 countries with the fewest barriers for foreign investors, according to the OECD’s FDI Regulatory Restrictiveness Index.