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Kazakhstan in Talks with Foreign Companies Planning to Relocate from Russia

By Vusala Abbasova July 22, 2022

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Kazakhstan might emerge as a new suitable location for companies that want to keep their presence in Eurasia amid the current geopolitical developments.

Kazakhstan plans to attract foreign companies by relocating their businesses from Russia amid severe sanctions on Moscow over its invasion of Ukraine.

Almas Aidarov, Kazakh Deputy Foreign Minister, said on Thursday that the ministry, jointly with state-run Kazakh Invest company, is in talks with 43 foreign companies planning to relocate their businesses to Central Asia’s wealthiest country.

“To date, 43 companies have an interest in either relocating production or opening new facilities here in Kazakhstan, or moving their headquarters in the Eurasian region to Kazakhstan,” Aidarov said in an interview with The Astana Times.

According to him, originally, the country was interested in 265 companies that publicly voiced their intent to leave the Russian market or shut down representative offices there. 

Since Russia launched its offensive on Ukraine, Western nations have tightened the screws on Moscow through severe sanctions that have crippled the country’s economy. Western powers targeted several large financial institutions, Russian sovereign debt, and wealthy individuals. Sanctions on Russia’s foreign debt envisage that the country can no longer raise money from Western financial institutions for state financing.

Dozens of international companies have abandoned or scaled back their operations in Russia in response to its invasion of Ukraine. Losses of global companies from operations in Russia amounted to more than $59 billion as of June 2022. 

Meanwhile, Kazakhstan might emerge as a new suitable location for companies that want to keep their presence in Eurasia amid the current geopolitical developments.

“At the moment, the arrival of such companies, their localization [in Kazakhstan] is important for us. This is an indicator of our investment climate,” said Aidarov.

On Wednesday, the US-based 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 safety 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 close 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 the opening of their Central Asian office in Kazakhstan, said Aidarov.

Among other foreign companies planning to relocate to Kazakhstan from Russia are WEG, a Brazilian electrical equipment producer, TikTok social media platform, Australia’s Fortescue Metals Group, and Carlsberg, a Danish brewing company.

In mid-July, Kazakh President Kassym-Jomart Tokayev instructed the government to create favorable conditions for the relocation of international businesses that have left Russia. He stressed that the measure should boost the production of goods.

In his recent interview, Aidarov also voice the country’s readiness to adjust some aspects of the legislation that might be outdated for relocating companies.

“We will not create any special conditions for individual companies, our legislation will not allow that. However, if we see that our legislation is not adapted to new technologies that companies bring, we might update it. Such updates will apply to all companies in the market, including local companies,” he explained.

With a population of slightly more than 19 million, Kazakhstan is the wealthiest and largest country in Central Asia. The country has long been working to attract more international businesses and investments by reviewing policies and introducing various benefits for doing business. In 2019, the Kazakh government announced the country’s intent to join the world’s top 30 economies by 2050.

Doing business in Kazakhstan has become 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, such as Italy (#58) and Brazil (#124).

Kazakhstan has focused its efforts on recovery and growth after the pandemic, aiming to significantly increase the volume of foreign direct investments 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 gives 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 about $24 billion of foreign investments, which is 38 percent more than a year earlier. Over 60 percent of foreign investment is already in the non-resource sector of the economy.