NUR-SULTAN

Kazakhstan sits on some of the most impressive natural resources in the world.

Foreign energy majors poured into the country in the 1990s and its oil fields were the main attraction. And of the $150 billion in foreign investment in the Central Asian country since independence, $120 billion, more than 70 percent, has been in natural resources extraction.

The vast country, with its relatively small population, attracts about 60 percent of all capital invested in the five former Soviet Central Asian states.

INTERNATIONAL CAMPAIGN

Kazakhstan has flooded international TV channels with flashy advertisements trumpeting the country’s investment climate. It scores relatively solid marks on indexes for ease of doing business, property protection, and judicial even-handedness.

Government officials are playing their part.

“Not all states of the region have similar factors of investment competitiveness. It is possible that in the future, competition for attracting investments in the region will intensify, but Kazakhstan takes this into account in its programme documents and is ready for such a scenario in order to assume leadership in this area in the future”, said Vyacheslav Dodonov, chief researcher of the Kazakhstan Institute for Strategic Studies, a government organ.

Lately, foreign portfolio investors have demonstrated special interest in government treasury bills or private sector bonds. These sectors alone have racked up $25 billion worth of foreign investments.

COVID-19 has taken its recent toll, with FDI projected to decline by 5-10 percent in 2021 with a recovery expected in 2022.

DIVERSIFYING AN OIL-RELIANT ECONOMY

Kazakhstan has been trying for several years to get off the “oil needle” – and diversify its economy.

Half the country is primarily agricultural and this sector remains less developed than it could be.

Kazakhstan’s position as a huge territory situated between the largest markets of Western Europe, East Asia and the Middle East also make it an ideal transport and logistics corridor.

Goods coming from China to Europe through Kazakhstan can be transported 3-4 times faster than by sea ​​routes.

Renewable energy is a new priority industry. Over the past two years, the total contribution from renewables has doubled, reaching three percent of total energy output.

SOME SIGNS CONCERN INVESTORS

Though Kazakhstan has advertised itself abroad as a country where property rights of investors will be protected, it has been associated with some concerns.

British Petroleum (BP), after more than a year of evaluation, passed up the opportunity to develop three offshore Kazakhstan Caspian oil fields in March. The company said it wanted to focus on renewables instead, as part of its global strategy aimed at revising its business model. But some analysts said BP’s move – whatever the case- could not be reassuring for other potential strategic investors in the country.

At roughly the same time – last month – Russia’s Lukoil signed a new oil deal with Kazakhstan.

Kazakhstan’s national company KazMunayGas and Lukoil plan joint exploration of the offshore section of Al-Farabi oil field in the Caspian Sea, Kazakh energy ministry said.

It said that sides held talks followed by signing a protocol. Two companies plan to set a joint venture, where the Kazakh side is expected to own 50.01%. Al-Farabi is located in the Kazakh sector of the Caspian Sea. The water depth within the site is 150-500 meters, the distance to the coast is 100-130 km, the area is about 6,000 square meters. Lukoil is already an investor in Kazakhstan with assets in the Khvalynskoye (50%), Centralnaya (25%), Zhenis (50%) projects as well as in Tengiz (5%), Karachaganak (13.5 %) and the Caspian Pipeline Consortium (12.5%).

Though foreign firms may establish and own businesses in the country, there are restrictions.

Foreign ownership of media outlets is capped at 20 percent. There is also a 49 percent limit on air transportation and telecoms services – though the limit on telecommunication investments can be waived through a special government permit.

Laws specify that domestic monopolies – like that of Kazakh national company Kazatomprom, must hold a controlling share in any uranium mining joint venture.

On the other hand, since 2020, foreign bank branches and insurance companies have been formally allowed to set up shop in the country. This was in accordance with Kazakhstan’s commitments under the World Trade Organization.

This year, the country also forbade the direct foreign ownership of land.

Local entrepreneurs in the East Kazakhstan region have also complained of interference by the regional administration.

The heads of a number of companies appealed to head of state Kassym-Zhomart Tokayev, Total.kz reported on April 15.

They called for a republican commission to be set up with the participation of representatives of the Accounts Chamber, the National Security Committee, the Anti-Corruption Service, the General Prosecutor’s Office, as well as the ruling Nur Otan party to examine the problems. The group of entrepreneurs say there is no trust left in the regional authorities.

“The reason for the negative problems investigated during the discussion was the disastrous decisions and actions of the regional leadership. Convincing information was presented about the lawlessness and injustice he was committing, lobbying for personal interests, disregard for the interests of the state, business and ordinary people,” the appeal said

According to the entrepreneurs, regional representatives were invited to the round table, but they ignored it. The chairman of the “Ak Zhol” party, Azat Peruashev, who took part in the round table by video link, said that a request had been sent to the parliament on the problems raised.

Foreign investors sometimes have registered complaints about arbitrary application of laws, with some saying they are designed to demand bribes. Enforcement has also sometimes been labelled opaque.

Other investors have complained about alleged tax harassment, including snap audits and inspections, or the threat of criminal charges to resolve civil disputes.

SPACE ADVANTAGES GIVE IMPETUS TO TELECOMS INVESTMENTS

The country has made an effort to develop its commercial space satellite and telecommunications sector. Russia still uses the former Soviet launch area in the country at Baikonur as its main launch facility.

Over just the past week Kazakhstan has signed a preliminary agreement with foreign telecom firm SES of Luxembourg.

Under a memorandum of understanding with the company, Kazakhstan aims to develop a high-performance, low-latency satellite constellation, currently scheduled for launch in late 2021.

The system aims to provide global coverage with as few as six satellites, and will ramp up eventually to 11 satellites. It is aimed at delivering dedicated services at multiple gigabits per second with unprecedented flexibility and resiliency, ensuring constant, efficient usage of bandwidth.