Investing in Kazakhstan is driven by 5 main factors. In this article, we will mention all the advantages and point out the main sectors for investment.
Main reasons to invest in Kazakhstan
- Kazakhstan’s economy is primarily based on its large hydrocarbon resources and strong production capacity in this area.
- Located at the crossroads of Europe and Asia, the country has benefited from the huge infrastructure investments made by China through its China’s Belt and Road Initiative program.
- The economic situation is relatively good and growing (4.1% in 2018) despite the financial sector affected by the financial crisis.
- Kazakhstan has a strong economic potential, a skilled and abundant workforce and a quality banking system that is based on a large surplus of foreign exchange (more than 50 billion USD in October 2018)
- Kazakhstan is the largest economy in Central Asia: the country accounts for more than half of the region’s GDP
Kazakh Invest and McKinsey & Company have determined the four most attractive sectors for foreign investors in short and medium terms.
The areas are:
- Food manufacturing
- The chemical industry
According to the release, more than 20 million hectares were devoted to agricultural crops in 2015. Approximately 50 varieties of crops grow in Kazakhstan.
The same year, Kazakh consumption of agricultural and food products totaled in excess of $35 billion. On average, consumption grew at an annual rate of more than 5 percent (2010-2015) with imports remaining high.
The main food products consumed in Kazakhstan are dairy products, flour and cereals, meat products, fresh and processed fruit, and vegetables, fats and oils. Analysts note only 25 percent of agricultural products grown in Kazakhstan undergo further processing; the majority of processed foods are imported.
The location between China and Russia, larges importers of agricultural and food products, makes the country more attractive for investors. Foreign direct investments in the agriculture and food industry have grown significantly, totaling more than $1.3 billion during the past five years.
The chemical industry
The chemical industry was also reported to be attractive for foreign investors due to a rich resource base and proximity to large growth markets, particularly China, Russia, Turkey and Iran.
“Access to low-cost feedstock with a high content of ethane (10 percent) and high demand for petrochemical products in neighboring countries make investments in this segment attractive. In addition, Kazakhstan is one of the key sources of hydrocarbons to the world economy, ranking 16th in the world by production volume in 2015,” outlined the report.
The Kazakh mining sector is a demand driver for bulk and specialty chemical production, said analysts. According to expert projections, given the positive global outlook for the mining industry, the demand for industrial chemicals will increase. Meanwhile, the growth dynamics of foreign direct investments in chemicals indicates the sector’s increased attractiveness for foreign investments.
Kazakh Invest and McKinsey analysts believe machinery to be another promising Kazakh sector.
“There is a considerable potential for import substitution in the machinery market, where import share has remained consistently high (80-85 percent) in the last five years,” noted the release.
Specific machinery products, such as agricultural tractors, have also shown significant growth in line with the entire Kazakh machinery market. In 2018, the share of foreign direct investments in the nation’s machinery sector against total machinery sector production amounted to 10 percent, note analysts. In recent years, international investors from the USA, France, China, South Korea, and others have invested more than $1.5 billion in Kazakh machinery projects.
The fourth most important sector of Kazakhstan’s economy is trade. Its share in the country’s GVA (Gross Value Added) is growing steadily, accounting for 18 percent in 2018.
“The young and employed population of Kazakhstan creates a buoyant demand for modern trade formats in all product categories”
Kazakhstan’s trade sector consistently attracts foreign direct investments. During the last five years, international investors have invested more than $12 billion in the area.
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