Kazakhstan Sees Drop in 2024 Foreign Investment, Key Projects' Completion Named As Factor

Foreign direct investment in Kazakhstan significantly declined in 2024, Orda.kz reports.

Gross inflow fell by 28.5%, from $24 billion to $17.2 billion, while net inflow turned negative for the first time — minus $2.6 billion compared to a positive $3.7 billion in 2023. This was reported by political scientist Marat Shibutov, who published an analysis on his Telegram channel.

The largest decreases came from the Netherlands (by $2.1 billion), the United States (by $1.9 billion), Switzerland (by $1.7 billion), China (by $900 million), and Monaco (by $800 million).

These funds had primarily gone to oil and gas projects such as Tengiz and Kashagan. According to Shibutov, the completion of expansion at Tengiz and the end of the active investment phase at Kashagan were key reasons for the decline.

Shibutov also noted a growing capital outflow to the UAE and offshore jurisdictions.

While these are officially recorded as foreign investments, he believes that in some cases they involve “domestic money under foreign flags.”

A comparison of FDI structure in 2020 and 2024, both with inflows of $17.2 billion, shows a shift in composition.

In 2020, debt obligations accounted for 63.8% and reinvested income for 29.1%. By 2024, reinvestment had dropped to -1.6%, while the share of debt obligations rose to 84.6%. This indicates a preference for lending over new investments.

According to Shibutov, the decline is not solely due to the end of major oil projects. There are no new profitable fields, oil prices remain low, and production is restricted by agreements.

Investors are also hesitant to fund exploration, particularly offshore. Regulatory uncertainty, such as frequent changes to the tax code and subsoil legislation, and disputes between the state and corporations, also play a role.

Still, interest in non-resource sectors has been growing since 2021.

Industrial and manufacturing projects are increasing, partly due to business relocations from Russia amid the war in Ukraine. Dozens of companies — including those in tech and logistics — have relocated to Kazakhstan.

Major foreign investors in the real sector now include Wabtec, Alstom, Honeywell, PepsiCo, John Deere, and KIA. Shibutov notes that foreigners are acquiring stakes in Kazakhstan's businesses, helping reduce the negative FDI balance.

With declining interest in raw materials, the processing sector is gaining momentum. Ongoing projects include the KMG PetroChem gas chemical complex ($9.7 billion), the KAZ Minerals copper smelter ($1.3 billion), and the KIA plant in Qostanay ($191.5 million).

The expert stresses the need for Kazakhstan to adapt to this new phase. Investment inflows are shifting not only in origin but also by sector. For growth to continue, stable rules must be ensured.

He also criticized restrictions on coal, gas, and oil exports, arguing that such bans reduce the country's investment appeal.

Supporting domestic producers is important, he said, but so is promoting technological and capital-intensive industries, even if they attract little foreign capital.

There is enough money in the economy now, but there is a lack of technology and entrepreneurial activity,
 the expert concluded.

Original Author: Ruslan Loginov