"Old Kazakhstan" and Sanctions: Why Russian Companies Are Leaving Kazakhstan

For the first time since 2022, Kazakhstan has recorded a decrease in the number of companies with Russian participation. Experts attribute this to both economic and political reasons, Orda.kz reports, citing DW.

According to the National Statistics Bureau of Kazakhstan, the number of Russian-owned companies decreased for the first time since February 2022. 11,390 Russian firms had been registered in Kazakhstan before this period, but this figure would later jump. With the beginning of mobilization in Russia, up to a thousand new enterprises were registered every month. However, starting in June 2024, the opposite trend has been observed: companies from Russia are gradually leaving Kazakhstan. In July of this year alone, 13 Russian companies discontinued their operations. 

Kazakh economist Arman Beisembayev says several factors in Kazakhstan complicate the business operations of Russian entrepreneurs and companies from other countries.

In his opinion, one of the reasons for the companies leaving is the toxic institutional environment, which complicates doing business. Kazakhstan, unfortunately, is no longer attractive for investment due to the deterioration of the business environment, he explains.

Beisembayev notes that one of the reasons for this is the budget deficit, which is forcing the government to tighten tax policy and raise tariffs for basic services.

All these measures require money, and the shortage only increases the pressure on businesses, he adds.

The existing clan system also factors in the departure of foreign companies from Kazakhstan.

It is difficult to do business in the country unless you are connected to some influential clan. The "Old Kazakhstan" has gone nowhere, and it will take at least ten years to dismantle this system, Beisembayev believes.

Some Russian firms came to Kazakhstan to avoid Western sanctions but encountered hurdles: Kazakhstan said it would comply with them. The economist explains that these schemes thereby became inoperable.

Beisembayev also points to the state's dominant role in Kazakhstan's economy, complicating foreign business operations.

The state is trying to control the economy entirely, and this deprives businesses of freedom of action. This is one of the reasons why foreign companies do not stay in the country for long, he concludes.

These findings are confirmed by data from the Agency for the Protection and Development of Competition of Kazakhstan. According to it, state participation in the country's economy reaches 46% in the manufacturing sector and 54% in the service sector, significantly higher than the figures for developed countries.

Original Author:  Artem Volkov