Nur-Sultan – the new name for Kazakhstan's capital city Astana – is a barometer of the changes seen in the country since it gained independence from the Soviet Union in 1991. Originally known as Akmola, or Tselinograd in Soviet years, the country's first president, Nursultan Nazarbayev, renamed it Astana – it means “capital city” in the Kazakh language – when he made it the seat of government in 1998 (taking over from Almaty).

From then on, a wave of new, sometimes futuristic, construction has transformed the once-sleepy left bank of the Ishim river that crisscrosses the area. The pace of change has been a testament to the country’s tremendous resources-powered economic growth as glittering buildings designed by the likes of renowned British architect Norman Foster sprang up in just a few years.

When Mr Nazarbayev abruptly resigned in March 2019, his hand-picked successor, Kassym-Jomart Tokayev, immediately suggested renaming the capital as a legacy to the first president. With a new leader in place, awaiting popular confirmation in June 9 elections, the country is transitioning into a new era. It now aims to add momentum to its development by diversifying the economy away from oil and gas, and distributing wealth more evenly.

Seeking new sectors 

“While we have created a competitive business climate open to any capital, our new approach emphasises a focus on the new economy and prospective sectors as drivers of our economic growth,” prime minister Askar Mamin said at the Kazakhstan Global Investment Roundtable (KGIR) held in Nur-Sultan in mid-May.

Since independence, the country has developed a foreign policy championed by Mr Nazarbayev, designed to raise its profile in the international community and attract global investment in the development of its abundant oil and gas resources. Overall, Kazakhstan had accumulated FDI of $147.1bn at the end of 2018; the figure stood at just over $10bn in 2000, according to figures from Unctad. This puts Kazakhstan second only to Russia among Commonwealth of Independent States countries.

The country has been attempting to diversify its economy and channel FDI towards other sectors for several years, with mixed results. Though agriculture, manufacturing and services sectors experienced some success, most inflows of foreign investment still target the resources sector (oil and gas and mining) or activities related to it. In the five years between 2013 and 2018, the sector always made up more than two-thirds of the country’s net inflows of FDI, according to figures from the central bank.

The government is expending efforts to highlight new investment opportunities, however. As many as 43 agreements in principle worth $8.7bn were signed between Kazakh and foreign companies in agriculture, trade, mining and metallurgy as the government brought together more than 1000 local and foreign delegates at the KGIR event.

“Both in traditional sectors and new sectors, it’s not just FDI, it’s also the transfer of technology and management capabilities,” says Saparbek Tuyakbayev, CEO of national investment promotion agency Kazakh Invest.

BRI location

In particular, Kazakhstan is emphasising its role at the heart of China's Belt and Road Initiative to capture some of the $605bn of trade volumes flowing between China and Europe, as well as its potential as a breadbasket at the doorstep of western China. Chinese companies are already growing crops in northern Kazakhstan, whereas major agribusiness companies such as Italy's Cremonini Group are making Kazakhstan a base for processing meat bound for the Chinese market.

“People will hear more about Kazakhstan in the future because of the proximity with so many large economies around the world,” says Josh Dixon, vice-president and general manager for international irrigation at US agricultural equipment manufacturer Valmont.  

“Kazakhstan is next door to China and Russia [and close to] the north of India; there are many billions of people living in close proximity that will be eating products grown in Kazakhstan or products that were shipped in from Kazakhstan.”

The country is also taking steps to deploy a 5G network to upgrade the potential of its manufacturing and services sectors. Pilot projects will be launched in Nur-Sultan, Almaty and Shymkent as local telecommunications companies team up with Finnish equipment provider Nokia to develop new generation networks.

“Working with [telecommunications] providers Veon and KazakhTelecom we will create a platform to continue the growth [of the Kazakh economy],” says Mikko Lavanti, vice-president for central and eastern Europe and Central Asia at Finnish equipment provider Nokia. “We believe this network will create the environment to invest more and [encourage] more development here. Its application will increase productivity in sectors such as manufacturing, smart agriculture, safe governance, among others.”

Promotional efforts

Along with such efforts, the Kazakh government has tweaked the state bodies in charge of investment promotion to increase their efficiency and capacity to bring in capital. It set up the Coordinating Council for Investment Attraction, led by the office of the prime minister, while the Astana International Financial Centre (AIFC) has become the working body of the coordinating council, acting as a one-stop shop for attracting FDI and promoting Kazakhstan’s investment image.

The numerous bodies that have so far shared different investment promotion responsibilities, from national investment promotion agency Kazakh Invest to sovereign wealth fund Samruk Kazyna and national holding company Bayterek, will now fall under the coordination of the AIFC in their dealings with foreign investors.

When the change was introduced in April, finance minister Alikhan Smailov said the measures would allow the quick formation of investment subsidies for investors and enable comprehensive work to increase the volume of net direct investment to begin. “At one of the next meetings of the government, a complete list of all necessary measures for the implementation of new approaches and the corresponding roadmap will be submitted,” he said. 

Assuaging fears

The Kazakh government has also pledged to address some concerns raised by the domestic and international business community over the rule of law, the volatility of the tenge, infrastructure and the allocation of land, the decriminalisation of tax offences and migration. The foreign affairs ministry has prepared a bill addressing each point, and the document is now being assessed by the economy ministry, according a government note published on April 22.

“We are ready to work through the new regulations and work in the new structure in the future, which will not only attract investment, but also [help everyone] better understand the systemic challenges that exist in the economy,” says Agris Preimanis, chair of the Kazakhstan Foreign Investors Association and country director of the EBRD.

With the end of the Nazarbayev era, it is a new beginning for Kazakhstan. The first president leaves a legacy now enshrined in the capital, and his past success in attracting FDI has set the bar high for his successor's future ambitions.