US Department of State Lauds Kazakhstan’s Progress Towards Creating Market Economy

ASTANA – Kazakhstan has made significant progress towards creating a market economy and has attracted substantial foreign investment to develop its abundant mineral, petroleum, and natural gas resources, according to the recent publication by the United States (U.S.) Department of State. 

Photo credit: gov.kz

Investment attractiveness

Since gaining independence, Kazakhstan has attracted considerable foreign direct investment (FDI). As of Oct. 1, 2023, FDI totaled $173.4 billion, primarily in the oil and gas sector. International financial institutions regard Kazakhstan as a relatively attractive destination for their operations, and some global firms have established regional headquarters in the country.

Economic diversification

“While Kazakhstan’s vast hydrocarbon and mineral reserves remain the backbone of the economy, the government continues to make incremental progress toward diversification into other sectors,” reads the statement.

Over the past two years, Kazakhstan’s economy has demonstrated resilience, mostly due to favorable commodity export prices. The country is expanding its external trade and developing its transit capacity and alternative transport routes, notably the Trans-Caspian International Transport Route, to support increased trade flows.

Reform agenda

President Kassym-Jomart Tokayev’s economic reform agenda aims to foster industrial development, support local producers, improve the business climate, increase privatization, and demonopolize the economy. Major tax reforms are slated to take effect in 2025.

However, despite institutional and legal reforms, challenges such as corruption, excessive bureaucracy, arbitrary law enforcement, and limited access to a skilled workforce in certain regions and sectors persist.

Foreign firms highlighted the need for better rule of law, deeper investment in human capital, improved transport and logistics infrastructure, a more open and flexible trade policy, a more favorable work-permit regime, and a more customer-friendly and consistent tax administration and regulatory environment.

Government’s efforts

Kazakhstan adheres to the Organization for Economic Cooperation and Development’s Declaration on International Investment and Multinational Enterprises, committing to certain investment standards.

The Kazakh government has taken several measures to enhance the investment climate, align with international standards, and promote sustainable economic development. These efforts include the creation of the Council for Attracting Investments, enhanced punishment for raiding in the Criminal Code, the enactment of the law on industrial policy, the imposition of criminal liability and punishment for corruption.