Kazakhstan plans to attract foreign companies by relocating their businesses from Russia under tough sanctions against Moscow over its invasion of Ukraine.
Almas Aidarov, Kazakh deputy foreign minister, said on Thursday that the ministry, together with state-owned Kazakh Invest, was in talks with 43 foreign companies planning to relocate their operations to Central Asia’s wealthiest country.
“To date, 43 companies have an interest in relocating production or opening new facilities here in Kazakhstan, or moving their headquarters to the Eurasian region in Kazakhstan,” Aidarov said in an interview with The Astana Times.
According to him, originally the country was interested in 265 companies that have publicly expressed their intention to leave the Russian market or close representative offices there.
Since Russia launched its offensive against Ukraine, Western nations have tightened the screws on Moscow with harsh sanctions that have crippled the country’s economy. Western powers have targeted several large financial institutions, Russian sovereign debt and wealthy individuals. Sanctions on Russia’s external debt mean that the country can no longer raise funds from Western financial institutions for state funding.
Dozens of international companies have abandoned or reduced their operations in Russia in response to its invasion of Ukraine. Global corporate losses related to operations in Russia amounted to more than $59 billion in June 2022.
Meanwhile, Kazakhstan could become a suitable new location for companies wishing to maintain their presence in Eurasia amid current geopolitical developments.
“Currently, the arrival of such companies, their location [in Kazakhstan] is important to us. It is an indicator of our investment climate,” Aidarov said.
On Wednesday, the American company Honeywell, a manufacturer of electronic systems included in the Fortune 100 list of the world’s leading companies, opened its first assembly plant for advanced automation and security equipment in Almaty.
“We highly appreciate Honeywell’s contribution to the development of the oil and gas sector in Kazakhstan. Since 1998, the company has been our preferred partner in the field of automation and artificial intelligence in a number of oil production and refining projects,” Aidarov said at the opening ceremony.
Currently, Honeywell is negotiating to open its Central Asia office in Kazakhstan, Aidarov said.
Other foreign companies planning to move to Kazakhstan from Russia include WEG, a Brazilian electrical equipment producer, social media platform TikTok, Australian group Fortescue Metals and Carlsberg, a Danish brewery.
In mid-July, Kazakh President Kassym-Jomart Tokayev instructed the government to create favorable conditions for the relocation of international companies that left Russia. He pointed out that the measure should stimulate the production of goods.
In his recent interview, Aidarov also expressed the country’s willingness to adjust some aspects of the legislation that may be outdated for business relocation.
“We will not create special conditions for individual companies, our legislation will not allow it. However, if we find that our legislation is not adapted to the new technologies brought by companies, we could update it. These updates will apply to all businesses in the market, including local businesses,” he explained.
With a population of just over 19 million, Kazakhstan is the richest and largest country in Central Asia. The country has long been striving to attract more international business and investment by revising its policies and introducing various advantages for doing business. In 2019, the Kazakh government announced the country’s intention to join the world’s top 30 economies by 2050.
Doing business in Kazakhstan just got easier, according to the World Bank’s 2020 ranking. The country ranked 25th, ahead of countries like Russia (#28) and China (#31), and some of the world’s developed economies, like Italy (#58) and Brazil (#124).
Kazakhstan has focused its efforts on post-pandemic recovery and growth, aiming to significantly increase the volume of foreign direct investment and fixed capital. One of Kazakhstan’s bold initiatives to attract investors and improve the investment climate is the introduction of a new instrument, called the Strategic Investment Agreement, which provides the opportunity to directly sign investment contracts with the Kazakh government.
For foreign partners, Kazakhstan remains one of the main investment partners in Central Asia. In 2021, Kazakhstan’s economy absorbed around $24 billion in foreign investment, 38% more than a year earlier. Over 60% of foreign investment is already in the non-resource sector of the economy.