Lack of investments in Kazakhstan
Large-scale investment inflow in the real sector of the economy is one of the defining conditions of forced industrial-innovative development of Kazakhstan. Given that currently the supply of domestic investors is not always able to meet the growing domestic demand for investment resources. Importance of foreign direct investment (FDI) takes place in this case.
Decline in FDI flows is noticed in almost all groups of countries, but especially notable losses are in the advanced economies. According to UNCTAD, on the basis of 2012 the inflow of foreign direct investment to CIS countries fell by 9.9 %. Despite the fact that Kazakhstan is in the top three in attracting FDI among the CIS countries, there has been a downward trend in investment. In 2011, FDI in Kazakhstan amounted to 1 % of the world total FDI, share of GDP in Kazakhstan on a global scale - 0.2 %. Net FDI in 2009 amounted to $ 13,12 billion, compared with $ 2.9 billion in 2011, which lowered Kazakhstan to 12 points (49th place). According to Standard & Poor's Kazakhstan is more dependent on net foreign direct investment (FDI) than other CIS countries, in particular Russia and Ukraine.
We have identified several key factors that we believe hinder the growth of the investment attractiveness of Kazakhstan:
1) High transaction costs
Why there is so little investment in Kazakhstan? The solution of the paradox is that the investment in an emerging market is linked with high transaction cost: the potential benefits are instantly "eaten" by all kinds of overhead costs (bribes, “agency” costs, protection of property, etc.).
Indeed, if we look at the emerging market through the eyes of a potential investor, then “typical” problems become apparent:
• Changes in legislation. The laws are constantly changing. Therefore, there is an increased risk of revision of the "rules of the game" to an unfavorable direction for the owner. Only in 2012, the Administrative Code of the Republic had 25
Decline in FDI flows is noticed in almost all groups of countries, but especially notable losses are in the advanced economies. According to UNCTAD, on the basis of 2012 the inflow of foreign direct investment to CIS countries fell by 9.9 %. Despite the fact that Kazakhstan is in the top three in attracting FDI among the CIS countries, there has been a downward trend in investment. In 2011, FDI in Kazakhstan amounted to 1 % of the world total FDI, share of GDP in Kazakhstan on a global scale - 0.2 %. Net FDI in 2009 amounted to $ 13,12 billion, compared with $ 2.9 billion in 2011, which lowered Kazakhstan to 12 points (49th place). According to Standard & Poor's Kazakhstan is more dependent on net foreign direct investment (FDI) than other CIS countries, in particular Russia and Ukraine.
We have identified several key factors that we believe hinder the growth of the investment attractiveness of Kazakhstan:
1) High transaction costs
Why there is so little investment in Kazakhstan? The solution of the paradox is that the investment in an emerging market is linked with high transaction cost: the potential benefits are instantly "eaten" by all kinds of overhead costs (bribes, “agency” costs, protection of property, etc.).
Indeed, if we look at the emerging market through the eyes of a potential investor, then “typical” problems become apparent:
• Changes in legislation. The laws are constantly changing. Therefore, there is an increased risk of revision of the "rules of the game" to an unfavorable direction for the owner. Only in 2012, the Administrative Code of the Republic had 25