Investments to Kazakhstan and impact of COVID-19 - WorldMonitor

Investments to Kazakhstan and impact of COVID-19

What are the steps to mitigate the negative impact on the investment climate and what package of measures to improve the investment climate does the Ministry plan to take?The global pandemic, which is opposed by the whole world, has affected all types of economic activity and has made adjustments...

What are the steps to mitigate the negative impact on the investment climate and what package of measures to improve the investment climate does the Ministry plan to take?
The global pandemic, which is opposed by the whole world, has affected all types of economic activity and has made adjustments to people’s usual lives. At the same time, this is not a separate economic phenomenon or event that concerns only one sphere or industry – today, decisions are made on the scale of states to level the differences between the previous conditions and the current reality in all sectors and spheres.

This year, according to the International Monetary Fund, a global economic decline of 3% is expected. In other words, experts predict a global recession, the first after the global economic crisis of 2008-2009 – then the global economy shrank by 0.1%.

Regarding changes in such an indicator as foreign direct investment inflows, experts from the Organization for Economic Cooperation and Development (OECD) expect global flows to decrease by 30%. At the same time, the flow of FDI to developing countries may be reduced, since the main sectors affected by the pandemic and measures to prevent the spread of coronavirus infection form a large share of FDI in these countries.

Another source of data that is taken into account when developing anti-crisis measures is the expectations of the United Nations Conference on Trade and Development (UNCTAD), which is projected to reduce FDI by 40% in 2020-2021. At the same time, it is expected that the revenues of companies, which account for a significant amount of FDI, will decrease by 30%, especially in the energy and raw materials industries.
Taking into account various scenarios of the development of events, which, incidentally, are rather difficult to simulate in existing realities, in early April of this year, the Ministry of National Economy of the Republic of Kazakhstan presented an updated forecast: for the first time in 20 years, the Kazakhstani economy may show negative growth rates at minus 0,9%. Moreover, plans for economic growth at the end of this year were formed at the level of 4.7-5.0%. As you can see, a pandemic will not pass without consequences for any country and it is extremely important to take effective measures to prevent the execution of negative scenarios.

The government of Kazakhstan has begun work in this direction. By the Decree of the Government of the Republic of Kazakhstan dated May 20, 2020, the Comprehensive Plan for the restoration of economic growth by the end of 2020 was approved. The comprehensive plan includes operational measures to support sectors of the economy – these are tax incentives, credit expansion, measures to develop infrastructure, support domestic production, entrepreneurship, and the preservation of employment.

As part of the implementation of the Comprehensive Plan, the Ministry of Foreign Affairs of the Republic of Kazakhstan has begun work on the formation of country investment programs, individual plans for large investment projects. We expect that country investment programs will determine specific long-term investment goals in each country and will help Kazakhstan overseas agencies to work closely with investors in their countries of residence.

In addition, approaches to working with investors ‘in Kazakhstan have changed: from now on, targeted companies will be assigned to the branch central state or local executive body, an industry company from the quasi-public sector. For each project, it is planned to develop a roadmap with specific steps for implementation and assignment of responsibility for its implementation to the head of the region or the head of the company. I would like to note that this practice is widely used in the countries of Southeast Asia, for example, Singapore and Malaysia.

Along with this, the package of measures introduced involves considering the possibility of introducing a mechanism for reimbursing investor costs for engineering infrastructure, as well as resuming visa-free 72-hour transit for citizens of China and India from November 1, 2020. It will also consider the possibility of resuming the stay of foreign citizens in accordance with the pre-quarantine period, in addition, special attention will be paid to determining a new procedure for visa-free transit of tourists from foreign countries, taking into account requirements to reduce the threat of spreading the coronavirus infection.

I believe that these and other measures taken in Kazakhstan to support business and production will help to maintain not only interest from foreign investors, but also the dynamics to attract investment in the country’s economy.

Similar adjustments and measures are introduced in almost all countries. Further scenarios of development not only of large enterprises and industries, but also of states, depend on measures for post-quarantine economic recovery.

Taking into account that the Ministry of Foreign Affairs is an authorized body to attract investment in Kazakhstan, could you share information on the initiatives of the Ministry to implement ongoing investment projects, considering the impact of COVID-19 on global markets and the fall in prices for the main export goods of the Republic of Kazakhstan?
Due to the specifics of its activities, our Ministry pays great attention to monitoring global and geopolitical trends. In this regard, I can say that the overall picture indicates that the fight against a pandemic will certainly affect all spheres of life, including the implementation of investment projects – foreign countries are gradually easing, opening borders, air traffic is being restored, but the period of forced downtime will not pass without a trace of negative impact.

Constant monitoring and predictive analytics help to prevent the occurrence of crisis situations. So, working ‘in anticipation’, our Ministry assists in the timely passage of equipment and raw materials necessary for the uninterrupted conduct of construction and installation works and ensuring the activities of existing projects. Assistance is being provided in admitting foreign commissioning experts; this is relevant for industries that have decided to suspend operations and are already returning to their usual work schedule and volumes. Also, during the emergency period, the Ministry assisted in the delivery of raw materials, equipment and components for the production of medical devices, protective equipment, antiseptics. The necessary goods were delivered from China, Russia, Turkey and European countries.

In general, in the area of investment activity, I would like to note that in our monitoring system, a pool of 244 investment projects totaling $64 billion has been formed to date, projects involving the creation of more than 36,000 jobs.

This year it is planned to commission 31 investment projects. However, due to the pandemic, the commissioning dates were tentatively postponed to the 3rd and 4th quarters of 2020.
The issue of assistance in solving the problems of investors is given special attention. For this, a Coordination Council was created under the chairmanship of Kazakhstan’s Prime Minister, which is designed to address the issues of large investors. To ensure systematic work with existing investors and solve problematic issues, the Institute of the Investment Ombudsman was also created – in our country, it is the Prime Minister, which once again confirms the Government’s focus on supporting and protecting existing investors. The working body of the Investment Ombudsman is the Investment Committee, in addition to assistance, the committee makes recommendations for their resolution, including the process of interaction with central state and local executive bodies.

At the same time, it is worth noting the work of the state’s dialogue platforms with the investment community, this is the Council of Foreign Investors under the President of the Republic of Kazakhstan, where strategic problems of investors are solved, the Council on improving the investment climate, which solves issues of a systemic nature.

A special role in this large mechanism for attracting investment in the country is played by our subordinate organization – JSC ‘NC KAZAKH INVEST’. The organization acts as a single operator to attract foreign investment in priority sectors of the economy and provides investment project support services on a ‘one-stop-shop’ basis, from the idea to the implementation of the project. Thus, problematic issues and appeals are considered immediately, as a high priority is how we are working to prevent any difficulties for investors.

I would like to assure that the Ministry will continue to work in this direction, using a clearly structured mechanism of work, to attract new and retain existing investors.
Almas Aidarov,
Deputy Minister of Foreign Affairs of RK

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