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  • Kazakhstan's net FDI grows 35 percent in 2020 despite the pandemic

Kazakhstan's net FDI grows 35 percent in 2020 despite the pandemic

3 September, 2021 11:41
Global flows of foreign direct investment have been severely hit by the COVID-19 pandemic. In 2020, they fell by one-third to $1 trillion, well below the low point reached after the global financial crisis a decade ago. Greenfield investments in industry and new infrastructure investment projects in developing countries were hit especially hard. These are some of the conclusions made by the United Nations Conference on Trade and Development (UNCTAD) in their latest World Investment Report 2021.

Data in the World Investment Report has shown that despite the negative impact of the COVID-19 pandemic on the global economy, in 2020, Kazakhstan showed the largest increase in net foreign direct investment among 17 countries with a transition economy and 34 landlocked countries.

Against the background of a total global decrease in FDI by more than one-third, which reached the lowest level since 2005, Kazakhstan received 34.9% more net FDI than a year earlier.

"One major exception to the overall decline of inflows in the region was Kazakhstan, the second-largest recipient of FDI, where inflows grew by 35 percent to $3.9 billion. Growing investment in mining, transport, financial services, telecommunication and energy compensated for declining inflows in construction, metallurgy and trade, which suffered particularly from the effects of the pandemic," said the report. 

Most investments were made into the country's large Tengiz project with Chevron expected to be completed by 2022. 

"In international project finance deals, the Kazakhstan QazTechna bus manufacturing plant project – involving Chinese capital – became operational at the end of 2020. Also involving Chinese capital was the construction of the DoubleStar rubber and tire factory, which started in 2020. In telecommunication, the Netherlands-based VEOL (VimpelCom) (Russian Federation) launched a new project," said the experts. 

The economic crisis due to the pandemic has resulted in significant changes in the structure of international trade and economic relations in the world, which has also impacted FDI flows.

According to the report, the volume of net FDI in the global economy fell by 35 percent last year, amounting to a total of USD 1 trillion, the lowest amount in the last 16 years.

In this regard, the coronavirus crisis has had a particularly strong negative impact on countries with economies in transition. According to the forecasts of UNCTAD experts, the recovery of FDI flows for these countries is expected only in 2022.

At the same time, according to UNCTAD, due to structural reforms and the policy implemented by the government of Kazakhstan in the field of attracting investments, Kazakhstan has recorded the largest increase in net FDI inflows among countries with economies in transition and landlocked countries. This growth was ensured by investments in industries such as manufacturing, transport, telecommunications, financial activities, energy, mining, and others.

The total volume of net FDI inflows to countries with economies in transition amounted to USD 24 billion last year, in Kazakhstan - USD 3.9 billion. This indicator is higher only in the Russian Federation.

A similar rating was compiled among the landlocked countries, among which the net inflow of direct investments amounted to USD 15.4 billion. In this group of countries, Kazakhstan ranked 1st in terms of net FDI.

The data of the UNCTAD report demonstrates that favorable conditions for foreign investors remain in Kazakhstan against the background of the negative impact of the pandemic on the global economy. The country’s consistently high positions in international rankings, as well as statistics on attracting FDI, confirm the high investment attractiveness of Kazakhstan, and the motivation of investors to start and continue to implement projects, even during a crisis period.

According to the forecasts of UNCTAD experts, the growth of the inflow of foreign direct investment in 2021 will average 10-15% worldwide and 5-20% in developing countries.

The full report is available here