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Kazakhstan is most economically profitable country in post-Soviet space

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New Delhi | May 31, 2023 11:08:21 PM IST
Kazakhstan is one of the most interesting countries in the post-Soviet space in terms of geopolitics and economic attractiveness.

While continuing to be a component of the "arc of instability", Kazakhstan, nevertheless, has been attracting increased attention from businesses and investors in developed countries since last year. On the one hand, they are tempted by the opportunity, de jure observing sanctions against the Russian Federation, to de facto continue doing business in the large Eurasian market, on the other - Kazakhstan today is the most economically profitable country in the post-Soviet space. And here's why.

The exchange of mutual sanctions between Russia and a number of Western countries has led to logistical failures that are very painful for the entire Eurasian region. And by all means of transport and here the corridor, which until recently was perceived by Europe as a kind of backup, but not a very attractive way, the Trans-Caspian International Transport Route, was very useful. European businesses began to actively talk about the need to activate this path in the summer of 2021. And already in 2022, the growth of transportation by TMM increased 2.5 times, amounting to 1.5 million tons. At the same time, the bulk fell on transit between Europe and China, as well as export-import supplies from the countries of the region and the EU.

The geopolitical location in the "centre of Eurasia" simultaneously turned Kazakhstan into a country "with which it is profitable to be friends." Firstly, logistics through the Caucasus is safe both from the political side (there are no risks of goods falling under the sanctions of the Russian Federation or the Republic of Belarus) and from the economic side.

Through the territory of Kazakhstan, the countries gain access to the regional market of more than 500 million consumers, including the EAEU market with more than 180 million consumers, the markets of Central Asia (50 million), Western China (300 million) and the Caspian Sea countries (150 million).

And at the same time, logistics services in Kazakhstan are at a very high level - the country has been working for many years to transform itself into a modern transit hub in the heart of the Eurasian continent.

In addition, more than 3,000 km of the 10,000 km of Beijing's "One Belt, One Road" initiative passes through the territory of Kazakhstan, which makes it an important section of the main West-East land corridor.

In addition, the activation of the North-South corridor through the Caspian Sea, Kazakhstan, Turkmenistan and Iran in 2022 provides quick access to the eastern regions of India. Which cannot but look attractive for European business. In fact, this is a new transit route for the delivery of goods from the EU to India (much faster than the sea route).

At the same time, Kazakhstan plays a key role in business relocation, including production facilities.

During 2022, more than 60 companies moved their offices to Kazakhstan from Russia and Belarus, including the American manufacturer of control systems Honeywell, the international service in the driver, the Australian mining company Fortescue and the Japanese trading company Marubeni, TikTok, Knauff, etc.

Among the production facilities in Kazakhstan, for example, the production of heavy-duty motorcycles was transferred to the Ural Motorcycles plant (Russia/USA) and the production centre for the assembly and restoration of pumping equipment, hydro cyclones, shut-off valves of Weir Minerals (Great Britain), the PKV Group of Companies (Lithuania) transferred the production of liquid crystal televisions from Russia to Kazakhstan, Koppert (Netherlands) is relocating the production of biofertilizers and plant protection products to Kazakhstan.

The Kazakh authorities are negotiating with more than 300 companies that have left or are planning to leave the territories of the Russian Federation and the Republic of Belarus.

However, we are talking not only about the relocation of companies but also about foreign direct investments of a number of countries in new projects in Kazakhstan.

In just 9 months of 2022, the volume of foreign direct investment exceeded USD 22.1 billion, which is 18% more than a year earlier. During the year, 46 new projects with foreign participation were launched in mechanical engineering, renewable energy, metallurgy and agriculture. At the same time, the main investor countries were the United States, European countries (primarily the Netherlands, France, Switzerland, Belgium, and Great Britain), as well as South Korea, Turkey and China. That is the main part of the countries that have entered into a political and sanctions confrontation with Russia.

And this is despite the fact that the same United States expressed great concern in the spring and summer of last year about the likelihood of Moscow circumventing trade sanctions through the territory of Kazakhstan.

First of all, we are talking about the so-called "parallel import". However, both then and during the recent meeting in Astana between Kazakh President Kassym-Jomart Tokayev and US Secretary of State Anthony Blinken, the Kazakh side expressed a firm position that the country would not be a tool to circumvent US and EU sanctions against Russia.

Kazakhstan has repeatedly assured its trading partners from Western countries that it will strictly control sanctioned goods and investments from a person or organization under sanctions. At the same time, Astana does not intend to retreat from trade relations with Russia and Belarus. A similar position was expressed by Tokayev at meetings both in European capitals during state visits to a number of EU countries and in Moscow.

The fact that Kazakhstan adheres to the chosen strategy clearly demonstrates Washington's "financial" confidence: 86% of all US trade with the Central Asian region last year came from Kazakhstan. Only in the 3rd quarter of last year, the volume of direct investments from the United States exceeded USD 5 billion, almost 40% more than in the first 9 months of 2021.

Confidence in Kazakhstan as a reliable and risk-free partner is also evidenced by the fact of increased interest in increasing investment and trade turnover with Kazakhstan from a number of other countries. For example, the United Arab Emirates has announced its intention to increase its investments in the country's economy by more than 5.5 billion US dollars during the current year, despite the fact that the total amount of investments in Kazakhstan by the UAE over the past 30 years does not exceed 1 billion dollars.

However, Kazakhstan's reasonable policy of balancing between political partnership and economic cooperation not only successfully harmonizes with the country's geopolitical attractiveness and potential access through its territory to the vast markets of the EAEU and Central Asia, but is also stimulated by very attractive business conditions.

Investors are provided with a full range of support services according to the "one window" principle -- from the search for an idea to the commissioning of a project, and monitoring is also carried out in the post-investment period, which allows you to work with each investor and project point-by-point, at all levels.

Such a mechanism allows you to broadcast projects from the regions directly to foreign institutions to search for potential investors and vice versa.

At the same time, a comfortable "soft infrastructure" has been built for investors: from work on explaining Kazakhstan's legislation and procedures for interaction with government agencies to transparency in decision-making and reducing the administrative burden.

The state guarantees investors the stability of the concluded contracts, provides soft conditions for the visa regime and the possibility of attracting foreign experts to work. In addition, Kazakhstan has developed and implemented new approaches to investor-state interaction, which include the development of investment proposals, investor support, identification and elimination of adverse factors.

In order to increase the efficiency of work on attracting investments into the country's economy, an information and monitoring CRM system is being introduced, which includes all agreements, roadmaps being developed for their implementation, tasks are assigned to all participants in the process - central state and local executive bodies.

Foreign investors are given the opportunity to function within the framework of English law - on the site of the Astana International Financial Center. Companies registering as AIFC participants receive not only a guarantee of protection of their rights based on case law, but also automatically receive additional preferences: tax benefits up to 50 years, simplified currency, visa and labour regimes. The Center is a financial hub for companies and investors from Central Asia, the republics of Transcaucasia, the EAEU, the Middle East, Western China, Mongolia and Europe.

In addition to "technical" support, interaction with investors is conducted in other vectors. Kazakhstan's development strategy until 2050 provides for the diversification of various industries, aiming, among other things, to provide the country's investment field with high-quality human capital, technological infrastructure and conditions for the development of science, digital technologies and innovations. Relevant requests from businesses are formed on the dialogue platforms of various associations and advisory councils. In particular, within the framework of the Council of Foreign Investors chaired by the President of the Republic of Kazakhstan and the Council for Improving the Investment Climate under the Prime Minister, created jointly with the American Chamber of Commerce "AmCham".

Kazakhstan, declaring the inviolability of its multi-vector foreign policy, rigidly adheres to the logic of economic benefits and adapts very effectively to the current conjuncture, ensuring mutually beneficial relations with any foreign investor. (ANI)

 
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