Foreign direct investment inflow to Kazakhstan increased by more than 15% in 2018

At a meeting of the government on April 22, where improving the work on attracting investments was discussed, Prime Minister of the Republic of Kazakhstan AskarMamin said that the gross inflow of foreign direct investment to Kazakhstan in 2018 increased by 15.8% and amounted to $22.4 billion.

“The First President of the Republic of Kazakhstan – Leader of the NationNursultanNazarbayev has set a task to ensure sustainable economic growth, which will require us to increase fixed investment up to 30% of GDP in the medium term. The main driver should be foreign direct investment,” said А. Mamin.

At the same time, the gross inflow of foreign direct investment to Kazakhstan in 2018 increased by 15.8% and amounted to $22.4 billion.

It should be noted that, according to Minister of Energy Kanat Bozumbayev, over the past 26 years, investments in the development of Tengiz, Kashagan and Karachaganak fields amounted to $121 billion.

Meanwhile, the figures for the purchase of the goods produced in Kazakhstan for the same period remain at a very low level. During this period, Kazakhstan’s oilfield services industry has significantly expanded its range of services. However, foreign subsoil users often trust Kazakhstani enterprises only to supply inexpensive goods, placing large orders abroad.

“For 20-25 years since the projects were launched in Karachaganak, Kashagan and Tengiz, the indicators for the purchase of Kazakhstani goods have remained at 5 percent level. And I am sure that the next 20 years the situation will still be the same, if nothing changes,” said the Director General of PSA Murat Zhurebekov during his speech at the VIII annual conference “Kazneftegazservice – 2019” organized by the Association of oil service companies of Kazakhstan.

According to the expert, in 2018, foreign content in the procurement of goods of Karachaganak Petroleum Operating B.V. (KPO) amounted to 88%, and in North Caspian Operating Company (NCOC)– to 73%.

As an example, the expert cited the purchase of gas re-injection compressors worth $1 billion for KPO.

“According to the country’s balance of payments, investments to Kazakhstan amount to $1 billion. However, in fact, this $1 billion does not go to Kazakhstan even for an hour. It immediately goes to the producer country of these compressors – to Italy, Florence, NuovoPignone Company,” said Murat Zhurebekov.

He explains that according to statements, this $1 billion goes to Kazakhstan in the form of investment; therefore investors take it back in the form of oil. Then they sell it and leave the gained billion again in their countries.

“As a result, the compressor is being built and brought to Kazakhstan. And for us it turns out to be simply import of goods. We all know that the state very widely supports investments in Kazakhstan, but this does not imply the import of goods”, said the Director General of PSA LLP.

According to him, 90% of all complex equipment purchased for the fields of Kazakhstan is imported.
Indicators of purchase of Kazakhstani goods are growing not during the implementation of large projects, but during their operation, when it is not necessary to import complex equipment from abroad, to bring large contractors. Then operators such as NCOC purchase goods from local producers, mostly rubble, sand and bottled water.