Jan 11, 2022
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Foreign capital in Kazakhstan

I wrote that in the international exchange of capital, Kazakhstan imports rather than exports capital. As of October 1, 2021, foreign assets of Kazakhstan amounted to $ 166.0 billion, and liabilities to foreign investors – $ 245.4 billion.

Liabilities to foreign investors at the beginning of the 4th quarter of last year had the following structure (billion dollars): direct investments – 170.0; portfolio investments – 28.7; others (loans and credits) – 46.6. Thus, direct investments accounted for almost 70% of all accumulated foreign investments in the economy of Kazakhstan.

The priority area of ​​foreign direct investment in the economy of Kazakhstan is the mining industry. So, for 9 months of 2021, according to the data of the balance of payments of Kazakhstan, gross direct investments in the economy of Kazakhstan amounted to $ 18.75 billion, of which $ 9.08 billion, or almost half (48.4%) fell on the mining industry. Including 6.47 billion dollars – for the extraction of oil and natural gas (34.5% of all direct foreign investments for the specified period).

In second place is the manufacturing industry – $ 3.58 billion.This is mainly investments in metallurgy and the production of simple metal products (excluding machine-building products) – $ 2.97 billion (almost 15.8% of all foreign direct investment in three quarters 2021).

But investments in high-tech industries are scanty. Thus, only about $ 150 million, or 0.8 percent of gross foreign direct investment, came to the production of mechanical engineering products, including vehicles, optics and microelectronics for the three quarters of 2021.

So, the sectoral priorities of foreign investors in Kazakhstan throughout all thirty years of the existence of this new state have been and remain the extraction of natural resources, their primary processing (primarily metallurgy), as well as transportation (pipelines) and industries with a quick return on investment (trade, finance, warehouses, etc.).

Where do direct investments come from in Kazakhstan? Here are the data for the last year (gross investments for the first three quarters, billion dollars, in parentheses – the country’s share in the total volume of direct investments,%): Netherlands – 5.44 (29.0); USA – 3.17 (16.9); Switzerland – 1.92 (10.2); China – 1.50 (8.0); Russia – 1.36 (7.3); Great Britain – 0.78 (4.2); Belgium – 0.78 (4.2); France – 0.46 (2.5).

In terms of the amount of accumulated direct investment, the picture will be somewhat different (as of mid-2021, billion dollars): Netherlands – 60.08; USA – 39.49; France – 13.39; Japan – 5.91; China – 5.25; Russia – 4.83; Hong Kong – 4.05; Great Britain – 2.99; British Virgin Islands – 2.56; Germany – 1.00.

And here is the picture of the income received by direct foreign investors in Kazakhstan. According to the latest data from the National Bank of Kazakhstan, in the second quarter of 2021, investment income of non-residents amounted to $ 5.593 million. This amount was distributed across countries as follows ($ million): Netherlands – 2.258.5; USA – 1.240.2; Switzerland – 365.4; Great Britain – 346.2; China – 299.9; Russia – 293.6; France – 173.8; Canada – 100.7.

For 12 years (2009-2020), incomes from foreign direct investment in the amount of $ 206.29 billion were withdrawn from Kazakhstan.On average, $ 17.2 billion is obtained per year. During this time, $ 66.90 billion was spent in the USA. .; the Netherlands $ 64.51 billion; to the UK – $ 13.94 billion; to Russia – $ 8.77 billion; to Switzerland – $ 5.09 billion

More than 70 percent of all investment income siphoned out of Kazakhstan for the period 2009-2020 came from three countries – the United States, the Netherlands and the United Kingdom.

Interestingly, although the United States has only the second largest accumulated direct investment (after the Netherlands), American investors received the largest amount of income over a 12-year period. This testifies to the high profitability of American direct investment in the economy of Kazakhstan. The return on British investment is also high. The UK’s share in the total investment income is significantly higher than its share in the total accumulated foreign direct investment in Kazakhstan. On the way, I will note that American and British investors are mainly present in the same industry – oil and gas. These are corporations Chevron, Shell, BP

The statistics of foreign direct investment in the economy of Kazakhstan contrasts quite sharply with the information provided by many Russian media: they say that a process of accelerated economic integration is taking place between Russia and Kazakhstan, the intertwining of their economies.

Judging by mutual trade, Russia is indeed the main trade partner for Kazakhstan. China is second in importance. In general, in 2020, the total trade turnover of Kazakhstan amounted to 85 billion dollars, while the share of Russia and China accounted for 34.3 billion or 40%.

However, figures on foreign direct investment in Kazakhstan indicate that Russia has a very modest investment position in the economy of its southern neighbor. Only sixth place – only slightly more than Hong Kong (seventh place). Kazakhstan’s investments in Russia are even more scanty. At the XVII Forum of Interregional Cooperation of Kazakhstan and Russia (October 2021) Kassym-Jomart Tokayev named the following figures: “The volume of direct investments from Russia over the past 15 years has reached more than $ 16 billion. In turn, Kazakhstani investments in Russia amounted to almost $ 4.5 billion “… (It was noted at this Forum that investments in uranium mining through Rosatom are strategically important for Russia. Rosneft and Lukoil have investments in oil fields on the Caspian shelf and in pipeline transport. Bogatyr Komir “(assets of” Rusal “). A special role for Russia is played by the Baikonur cosmodrome, jointly operated by the two countries. The Russian group” Inter RAO “is negotiating the creation of a joint venture with the parties to cryptocurrency mining farms).

In the process, I will note that the amount of direct Russian investments named by the President of Kazakhstan is greatly overestimated. The NBK gives more than three times less figure. I think that the differences can be explained by the fact that $ 16 billion is total gross investment, and the NBK figure of about $ 5 billion is net investment (excluding “reverse” investments that are withdrawn by a foreign investor from Kazakhstan).

Much has been said in recent years about China’s expansion of its presence in Kazakhstan. However, the data of the National Bank of Kazakhstan show that today China also occupies only the fifth place among foreign investors in the country. Suffice it to note that the accumulated investments of France are more than one and a half times higher than the total (PRC + Hong Kong) Chinese investment presence in Kazakhstan.

The dominance of Western investors in the economy of Kazakhstan (especially from the USA, the Netherlands and the UK) is a major obstacle to further economic rapprochement between Russia and its southern neighbor. Moreover, the large-scale presence of Western capital in Kazakhstan increases its vulnerability to subversive operations from abroad. And the task of the latter is to finally oust Russia from the economic space of Kazakhstan, torpedo the rapprochement of these two states and, if possible, make them opponents.

The West is just as jealous of China’s attempts to gain a foothold in a number of sectors of Kazakhstan. First of all, in the oil and gas industry, where corporations hold key positions Shell, BP, Chevron… Experts note that Nazarbayev played along with Chinese investors, with the help of which he wanted to somewhat weaken the influence of the West. According to one version, it was the Western oil TNCs that provoked the January unrest in Kazakhstan in order to achieve the removal from power or weakening of the positions of pro-Chinese (and at the same time pro-Russian) politicians.

Photo: Chevron Houston

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