Kazakhstan remains stable destination for investors
July 20. The FINANCIAL
Kazakhstan’s stable macroeconomic, social and political climate is viewed as its most attractive feature to those investing in the country this year, according to EY’s third Kazakhstan Attractiveness Survey.
The continual instability of the global economy has led investors to look at countries such as Kazakhstan as a safer place to grow. While global FDI inflows declined by 18% between 2011 and 2012, Kazakhstan remained a stable destination for investors, receiving US$14b in FDI inflows, shows the report.
“Untapped opportunities will open up as Kazakhstan diversifies away from extractive industries. Kazakhstan has recorded consistent economic growth over the last few years, the country is climbing up the ladder to become one of the top three fastest growing economies among the rapid-growth markets in 2015 and, in the eyes of international investors, it is a stable place in which to invest,” said Erlan Dosymbekov, EY’s Managing Partner, Kazakhstan and Central Asia.
The country’s competitive geographical location at the junction of Asia, Europe and the Middle East enables access to the rapidly growing markets of Russia, India and China, creating unique opportunities for investors and local companies, according to Ernst & Young Global Limited.
Looking ahead, Kazakhstan’s GDP is expected to accelerate at 6% in 2013, 7.5% in 2014 and 7.1% in 2015. Strong growth projections for Kazakhstan are predicated on high commodity prices, strong infrastructure spending and improved grain harvests. Kazakhstan’s oil production and exports are also likely to get a boost in the near future, according to Ernst & Young Global Limited.
Unsurprisingly, Kazakhstan’s vast natural resources base is its key asset, according to investors. The country ranks 12th in the world in terms of oil reserves and 19th for natural gas reserves. However, continued dependence on extractive industries will not deliver sustainable growth in the future. Kazakhstan’s government acknowledges the need to diversify its economy, and is promoting initiatives and policies to improve knowledge based industries so that they can become more competitive and attract more investment.
As a result, investors are finding that a more diverse range of sectors are beginning to emerge as attractive investment options. Respondents to the survey highlight private and business services (15%), life sciences (12%), real estate (11%) and telecommunications (6%) as sectors that will offer opportunities in the future, according to Ernst & Young Global Limited.
Respondents already present in Kazakhstan are confident about investing in the country. More than two-thirds plan to increase their operations in the country, while 18% plan to maintain their current level. However, only 6% of survey respondents with no presence in Kazakhstan are considering setting up activities in the country, whereas two-thirds are unlikely to enter the country.
“To unlock its growth potential, Kazakhstan must do more to make international investors aware of its strengths. To bring about sustainable and balanced growth, it is critical for the Government of Kazakhstan to reduce its reliance on the oil and gas sector,” said Erlan Dosymbekov.
“To address the country’s wide regional economic disparities, the social infrastructure and health care system require development while to improve the business climate, Kazakhstan’s regulatory environment needs to be made more transparent and predictable. And to boost innovation, incentives are required, along with better education and training,” he added.