Analysis: Kazakhstan shifts its focuses in attraction of foreign investments

/IRBIS, Dec.7, 00/ - The Great Silk Road World News Agency informs that shift of focuses in attraction of foreign investments is taking place in Kazakhstan. Everyone knows that an economic rise in the conditions of globalization is accompanied by competitive activity between leading world TNCs. This trend stimulates the process of international concentration and centralization of capital. In 1999, the number of international transactions related to TNC mergers grew by 47% against the last year. According to the UNCTAD, the amount of assets involved in the unusually vivid trans- boundary merger of TNC totaled around $1.1 trillion in 1999. This process will result in the enforcement of international flows of capital, i.e. the enforcement of foreign direct investments. In 1999, the total amount of FDI in the world reached a record high level of $865b, which overcomes 1998's rate of $680b by 27.3%. Against this background, the Kazakh government attempts to reject the recent policy of "privileged conditions for foreign investors and to converse to guaranteeing equal rights for all economic agents". Particularly, Kazakhstan intends to shift the focus from quantity to the quality of attracted foreign investments. The Kazakhstan Agency on Investments says that the approach is based on a quantitative aspect which can be called "archaic" because FDI in Kazakhstan made up $10b from 1993 to 1999, including $1.9b which was disbursed in 1999 (less than 0.2% of the world rate). Recently, the Agency has released (with reference to the EBRD) the apparently false information that Kazakhstan holds the leading position taking into account the amount of FDI among CIS nations and the third position among the nations of Central and East Europe and the Baltic. Actually, according to the UNCTAD, the FDI are distributed as follows: Poland holds the first position among these nations (1999) with $7.5b in investments, followed by Czech Republic with $5.1b, Russia with $2.9b, Hungary with $1.9b, and then by Kazakhstan (Source: World Investment Report, 2000, pp.28-287). As for the qualitative parameters of FDI, which are understood by the KAI as orientation of FDI towards the sectors, here an express distortion can be observed. Some 54.4% of the total amount of FDI invested in the Kazakhstani economy from 1993 to 1999 were directed to the oil and gas sector, 20.1% to the non-ferrous metallurgy sector, 3.8% to the ferrous metallurgy sector, 3.7% to the energy sector, 3.4% to the food industry, 2.3% to communications, 1.9% to the mining industry, and 10.5% to the other sectors. Some 208 projects involving hydrocarbons and 336 projects involving solid minerals such as gold, coal, complex metals, iron, manganese uranium and others will be implemented in Kazakhstan late 2000. The investments in exploration projects shrank. For example, if the index made up 14% of the total amount of investments in the mineral sector in 1996, it merely reached 5% in 1999. Only 3% of the $121.7m of investments (during 6 months of 2000) fall on exploration of solid minerals. That is why, according to officials, a program for development of the mineral sector, which is under development by the Kazakhstani government, will become a strong incentive for attraction of FDI in exploration projects. On the other hand, there is no doubt that it is necessary to set up industries with higher treatment standards. The KAI has developed and passed for government's consideration a draft on investments, which was developed on the basis of current Kazakhstani acts on investments and on national support to direct investments. The new draft is aimed at "establishment of equal conditions and rights for home and foreign investors, and optimization of governmental guarantees for investment programs in Kazakhstan." The review has been prepared by GSRW: The Great Silk Road World News Agency; 7, Gainsford Street, London, SE1 2NE, U.K. TEL/ FAX 44 0171 403 20 37 greatsilkroad@btinternet.com