In 2024, Kazakhstan experienced a significant decline in foreign direct investment (FDI), with inflows dropping 32.3 times compared to the same period in 2023, from $2.3 billion to $72.9 million, marking the lowest level recorded since 2005. This drastic decrease was first highlighted by economist Galymzhan Aitkazin.
The National Bank of Kazakhstan’s data revealed that FDI includes reinvested earnings and debt instruments in addition to foreign equity participation. For the entire year of 2023, FDI inflows had already halved compared to the previous year, reaching $3.4 billion. The peak of foreign investment was in 2008 at $14.3 billion, while the lowest (excluding 2024) was in 2005 at $2 billion.
Russia led FDI into Kazakhstan in 2023 with $931.9 million in the first half of the year, although this represented a 21.4% decline from the same period in 2023. Other top contributors included Singapore, Luxembourg, Switzerland, and Cyprus. The wholesale and retail trade, financial and insurance activities, and manufacturing sectors attracted the most investments.
Conversely, capital outflows from Kazakhstan were significant in the first half of 2024, with the United Kingdom receiving $1 billion, followed by the USA ($353 million), China ($244 million), and France ($148 million). Aitkazin attributes this trend to capital repatriation, loan repayments to foreign parent companies, and profit or dividend withdrawals.
By the end of the first nine months of 2024, FDI outflows amounted to $1.5 billion, compared to $701.5 million in inflows during the same period in 2023. The net FDI position stood at minus $1.6 billion, an improvement from minus $3.2 billion in 2023.
Aitkazin describes the net FDI situation as catastrophic, citing capital outflows and reduced investments in resource sectors due to the completion of major projects and the ongoing uncertainty in the investment climate and business environment.
Despite the challenges, Kazakhstan’s gross FDI inflows for the first three quarters of 2024 totaled $12.7 billion, a 35.7% decrease year-on-year. In 2023, Kazakhstan ranked sixth globally in macroeconomic development and FDI attraction, according to the IMF and FDI Intelligence.
Aitkazin notes that while gross FDI inflows reflect foreign investors’ interest in Kazakhstan’s economy, they do not account for capital outflows. Ex-president Nursultan Nazarbayev had set a target of $30 billion in FDI by 2025, with the highest inflow recorded in 2012 at $28.8 billion and the lowest in 2015 at $15.4 billion.
In August 2023, National Bank analysts concluded that the government of Kazakhstan uses an inaccurate metric to assess FDI effectiveness, as it overlooks capital outflows, thus consistently showing positive results. The Bank stated that gross FDI data alone is insufficient to understand the full picture of investment flows.
