Kazakhstan’s Foreign Direct Investment Data Paints a Misleading Picture

New analysis of official data published by Kazakhstan shows that its claims of record foreign investment in 2022 are exaggerated.

According to research commissioned by Tristangate.com, foreign investment in Kazakhstan is lower today than it was 10 years ago. In 2022, the Government of Kazakhstan announced that FDI reached a record high of $28 billion. While FDI in 2022 marked a relative peak in real terms compared to the last decade, investment levels are significantly lower than they were in 2012.

There is broad agreement among foreign investors that despite its wealth in natural resources, Kazakhstan cannot hope to attract foreign investment at the level it desires unless it treats investors better. The case of Tristangate casts a deep shadow. 

FDI from Kazakhstan’s key investment partners has fallen over the last decade. In 2022, investment from four of the country’s top ten investors – China, France, the UK, and Germany – fell by more than 40% compared to 2012.

Kazakhstan has also not secured new investment in a major energy project in the last 30 years. A significant portion of the FDI reaching Kazakhstan today is from ongoing capital expenditure — from just three major oil and gas projects — agreed on in the early 1990s.

Official data indicates that around 40% of Kazakhstan’s foreign direct investment comes from the Netherlands and Switzerland, jurisdictions which the IMF has noted are well-known for attracting “phantom FDI.” Phantom investments occur when money passes through corporate shells for tax optimization purposes and is not associated with real economic activity. Despite Kazakhstan’s claims that FDI from the Netherlands increased by 16% from 2021 to 2022, no major Dutch company announced plans to invest in the country during this period.

Arbitrary law enforcement and challenges to contractual rights are key problems facing foreign investors in Kazakhstan. One example is the Government’s continuing refusal to pay a final, binding, and non-appealable $500 million arbitration award to the foreign owners of Tristan Oil, whose assets were illegally expropriated in 2010.

To achieve its goal of diversifying the economy and raising productivity, Kazakhstan needs to attract higher levels of investment.

Investors will only come to the country in larger numbers if they can see good prospects for returns in a secure environment. They pay attention to violations of rule of law.

It’s time to resolve Tristangate.