The CEO of KAZAKH INVEST Initiated projects should not be postponed
The decline in foreign direct investment flows globally has severely tested the world economy. The pandemic, as well as related restrictions and quarantines, was another consequence of this fact. According to UNCTAD (United Nations Conference on Trade and Development, World Investment Report 2020), last year the volume of foreign direct investment (FDI) in the global economy decreased by 35%, amounting to $1 trillion, while this figure by the end of 2019 made up $1.5 trillion.
Alongside with that, by the end of 2020, the gross inflow of foreign direct investment in Kazakhstan amounted to $ 17.1 billion - the decrease in foreign capital inflows was leveled to 29.8%. There is a timely response from the government - the necessary measures to stimulate FDI have been taken and new instruments to support investors have been introduced. Moreover, according to the results of the first quarter of this year, the volume of FDI amounted to $4.4 billion, which is 10% higher compared to the same period last year ($4 billion). FDI inflows are recovering. Meirzhan Yusupov, CEO of NC KAZAKH INVEST JSC announced this in his interview.
- Meirzhan Bakhitovich, how exactly are you working to attract investments in Kazakhstan?
- It is built on the principle of a three-level system “foreign institutions -center-regions” with extensive use of the potential of foreign embassies of the Republic of Kazakhstan.
Thus, these are joint efforts with government agencies to form an “investment order”. Attractive product groups are identified in order to organize production in the Republic of Kazakhstan, taking into account the market size, raw material base, logistics and export opportunities.
Furthermore, work is also in progress in significant and large projects to prepare investment proposals meeting international standards, for which international consulting companies are involved, including from the Big Four.
35 investment proposals have already been prepared this year. The top lines are projects in such sectors of the economy as agro-industrial complex, mining and metallurgical complex, petrochemical industry, mechanical engineering, pharmaceuticals, production of building materials, light industry and others. Moreover, 35 more projects are planned to be prepared by the end of the year.
As part of a proactive approach to attracting investors, these proposals are sent to all foreign offices of the Republic of Kazakhstan to target potential investors.
Thus, for today we have prepared a total of 158 investment proposals complying with generally accepted practices. These are specific projects where there are already local partners with business plans and financial models for projects. Such a proactive approach to attracting foreign capital has found to be efficient - investors have already been attracted for 19 investment proposals and joint implementation of projects has begun - a local and a foreign investor.
As noted above, all countries of the world are introducing new instruments to stimulate investment in order to avoid negative consequences. In Kazakhstan, to improve the investment climate and support strategic investors, a new instrument has been introduced - an investment agreement to provide them with special conditions and help unblock the entire range of investment opportunities in the Republic.
This measure is expected to have a significant impact on the development of priority sectors of the economy. For these purposes, a special Task Force negotiating team has been created on the basis of KAZAKH INVEST, consisting of experts from our company and the AIFC Business Connect division to ensure end-to-end support of these strategic projects.
To date, the Task Force team pool includes 36 projects worth $9.25 billion with the participation of strategic foreign investors. The process of increasing the efficiency of attracting investments was based on the classic sequence of commercial private equity transactions (private investments): preparatory part, appraisal, negotiations, decision-making by the founders, signing the agreement and closing the transaction.
- The major factors in making a decision on investment are political stability, legal framework and government support measures. How is it crucial to promote the country's investment image on the world stage?
- The investment image of the state is a crucial factor for investors when making decisions. The key goal of image events, in line with global trends, is to strengthen the country's competitiveness in the struggle for investors in international markets, to draw their attention to the investment climate and opportunities in Kazakhstan, to explain the advantages of the market and the investment potential of our country.
It should be emphasized that the pandemic has made its own adjustments in the ways of communication. Taking into account global trends, an increasing number of image events are moving to the online format. Over the past 7 months, more than 18 thematic webinars were held in this format.
Also, more than 50 visits of potential foreign investors from the USA, Switzerland, Russia, Israel, Portugal, Turkey, Qatar, the United Arab Emirates, Sweden, etc. were organized, as well as supported 19 investor delegations.
The particular outcomes of the above events and visits made it possible to attract new investors to the economy of Kazakhstan. And this, in the long term, new jobs, tax revenues to the budget, an increase in the country's export potential and the growth of the competitiveness of Kazakhstan products in the world market.
So, over the last 7 months of this year, agreements were reached with more than 30 foreign investors on the prospects to implement new projects in Kazakhstan. They include such significant projects as the construction of industrial greenhouses in Aktobe and West Kazakhstan regions, meat processing plants in Almaty, Akmola and East Kazakhstan regions, construction of solar power plants in Akmola region, production of medicines, as well as ICT, logistics, production building materials and others. A comprehensive examination is already underway on them, issues of providing projects with the necessary raw materials, an infrastructure base, as well as logistics and export issues are being discussed.
In general, KAZAKH INVEST continuously monitors and supports investment projects, provides comprehensive support for investors, and assists in solving urgent issues.
The efforts are being addressed on a regular basis to provide service support to investors through a round-the-clock call center, visa support, assistance in concluding an investment contract and legal support in the implementation and creation of investment projects.
- If we take into account a specific indicator to assess the effectiveness of work, it relates to completed projects. How many of them do you currently have?
- Since the establishment of KAZAKH INVEST in 2017, we have been conducting targeted efforts with almost every foreign investor in priority sectors of the economy of Kazakhstan. So, for example, one of the key tasks of the company is to provide end-to-end support of projects on the principle “from idea to implementation”. For this purpose, the company constantly monitors the progress of investment projects with the participation of foreign capital.
To date, the pool consists of 456 projects with the creation of over 67,000 jobs. Including, 131 projects have been implemented and are under post-investment monitoring, 93 projects are underway, and 74 projects are under development. Additionally, 158 new investment proposals for potential investors have been prepared meeting international standards.
It is worth noting that responsible employees are assigned for each project, who constantly monitor the progress of investment projects, identify urgent issues and assist to resolve them.
- As authoritative analysts find, foreign investment flows will recover towards the end of 2022. How many projects have already been implemented in Kazakhstan and how many ones are planned to be implemented by the end of the year?
- Foreign investment is one of the most important factors in the dynamic development of the economy. Thanks to this, enterprises are created and developed, productivity increases, and jobs are created. Following the results of 7 months of 2021, with the support of KAZAKH INVEST, 14 investment projects with foreign participation were commissioned totalling $759 million, almost 1,160 jobs were created. Among them are gas chemistry projects in Atyrau region with the participation of French TNK, a cement plant with a capacity of 1.2 million tons per year in Almaty region with the participation of a Singapore company, renewable energy projects and others.
Moreover, by the end of the year, it is expected to launch 32 more projects worth $4.1 billion, including the construction of an enrichment plant in Karaganda region, the production of large-diameter pipes in Almaty, a meat processing plant in Kostanay region, as well as renewable energy projects and others. By the way, the implementation of these investment projects will create over 6,000 permanent jobs.
In general, taking into account the ongoing restrictive measures as a consequence of the COVID-19 pandemic, the emphasis when working with projects of foreign investors was placed on preventing the postponing of projects which have already been started.
As I have already stressed, there has been a global decline in new initiated projects. Thus, during the pandemic, we especially focused on projects which are under implementation in Kazakhstan.
At the same time, providing high-quality and timely service support to investors was of particular importance during the lockdown period. While addressing problematic issues related to investment projects, it became critically important to provide operational support, including the timely resolving of visa and migration, customs, logistics and other issues.