The investment climate in 2024 has looked cautiously optimistic, although prospects are clouded by the perennial uncertainty of economic conditions. While global foreign direct investment modestly recovered, major challenges remain, such as geopolitical tensions and inflation in developed markets. As a result, investors are seeking new emerging markets. Among them, Kazakhstan, the largest and most economically developed country in Central Asia, is one of the options on the table. Situated at the juncture of Europe and Asia, possessing significant natural resources, and pursuing an economic diversification policy, the country is worthy of closer attention.
Diversification Beyond Oil and Gas
Kazakhstan has historically been dependent on oil and gas, yet in recent years it has been diversifying its economy. According to preliminary estimates, Kazakhstan’s GDP growth for the first 11 months of 2024 reached 4.4%, primarily driven by the development of the non-oil sector. Over 70% of economic growth came from manufacturing, trade, agriculture, and construction. Overall, domestic goods production grew by 5%, while services rose by 4.5%.
Additionally, state support measures have boosted the share of micro, small, and medium-sized enterprises (SMEs) in Kazakhstan’s economy by 1.8%, reaching 38.2%. As of December 1, the number of active SMEs increased by 1.5%, surpassing 2 million enterprises.
The country’s economic diversification is also based on its privatization program, which aims to reduce state involvement in the economy and improve market efficiency. Around 675 public and quasi-public companies are planned to be privatized in 2021-2025.
One aspect of the privatization initiative is the “People’s IPO” program, which allows citizens to acquire shares in major state-owned enterprises. In 2024, the Samruk Kazyna Sovereign Wealth Fund commenced IPOs for several of its portfolio companies. Specifically, Air Astana, Kazakhstan’s flagship carrier, successfully completed its IPO in February 2024.
In May 2024, Kazakhstan’s President, Kassym-Jomart Tokayev, signed a decree on measures to liberalize the economy. The objective is to create a more competitive business environment, encourage private sector development, and reduce the involvement of the state in the economy.
Technology and ICT
Kazakhstan’s “Digital Kazakhstan” program is a particular selling point for the country. The focus of the program is on digitizing the economic sectors, developing safe communication networks, and promoting entrepreneurship in the tech field.
The creation of the Astana International Financial Centre (AIFC) in 2017 has fired up the digital economy. With a legal system based on English common law, tax holidays, and fintech-friendly policies, the volume of investments attracted through the AIFC has reached $14 billion, $6.7 billion of which are portfolio investments on the Astana International Exchange. More than 3,400 companies from 85 countries have been registered at the AIFC.
Moreover, Kazakhstan is actively involved in developing its artificial intelligence sector, which is now central to its digital initiatives. In July, the government adopted the Concept for Artificial Intelligence Development for 2024-2029, which aims to establish an AI ecosystem that would contribute to the development of all sectors of the economy. A key project in this regard is the creation of the Alem.AI International Center. It will include research and development labs, a programming school, and offices for international technology companies.
Critical Metals and A Global Trade Gateway
Kazakhstan is also becoming an important player in the global supply chain of rare earth metals and essential minerals, which are required for high-tech industries and the green energy transition. The country is expanding exploration and forging international partnerships. Kazakhstan has a vast resource base, with 124 identified deposits of rare and rare earth metals, though only 37 have been explored so far. According to the World Bank, more than 5,000 undiscovered deposits worth over $46 trillion may exist in the country. Recent exploration showed about 800,000 tons of valuable minerals. At the same time, the country has voiced its commitment to environmentally responsible mining.
Kazakhstan leverages its geographical advantage of being located between China and Europe, especially through the Trans-Caspian International Transport Route, which is also known as the Middle Corridor. It connects China and Europe through Central Asia and has become a particularly popular trade route in recent years.
Kazakhstan has essentially become a key logistics hub in 2024, handling record-breaking cargo volumes along the TITR, which rose by 63% in the first 11 months of 2024, reaching 4.1 million tons.
Through increased investment in rail infrastructure and digital logistics platforms, TITR has become an increasingly reliable alternative to existing routes. Specifically, in early 2024, the European Union and Central Asian investors committed €10 billion to support in the sustainable development of the TITR. The objective is to transform the corridor into a cutting-edge, multimodal, and efficient route connecting Europe and Central Asia within 15 days.
Investment Incentives
Since its independence from the Soviet Union in 1991, Kazakhstan has been working to improve its investment climate through reforms, streamlined procedures, and competitive tax policies. The reforms are based on the promise to establish a “Just Kazakhstan,” a country that benefits all citizens. Politically, the country reduced the powers of the President and enhanced the powers of the elected Parliament, thus ensuring political stability, which also benefits foreign investors. Specifically in the investment sphere, the National Digital Investment Platform, launched in 2024, simplified investment processes and reduced administrative burdens.
Additionally, the Kazakh government has introduced several incentives to attract foreign direct investment, such as tax holidays that offer corporate income tax exemptions for 10 years in priority sectors. Furthermore, companies that operate within Special Economic Zones (SEZs) benefit from tax-free operations on corporate income, land, and property for up to 25 years. Investors can also receive up to 30% capital reimbursements on their investments.
The Central Asian country has also introduced mechanisms for investment agreements that offer stability in tax legislation for 10 years upon conclusion. To facilitate long-term investment, investment agreements secure a 10-year freeze on major tax rates and customs duties, which aim to provide a stable and predictable business environment.
Kazakhstan also engages with foreign investors through government-backed platforms such as the President’s Foreign Investors Council, which provided an opportunity to voice suggestions and proposals on investment-related issues in the country.
In addition, the country hosts the Astana International Forum (AIF), which, in 2025, will take place on May 29-30. Building on the inaugural edition in 2023, the 2025 AIF will gather leaders from around the world to exchange perspectives on the most critical issues of the day. One of the pillars specifically focuses on the economy and finance, enabling participants to discuss global economic issues as well as those directly relevant to Kazakhstan. With more than 5,000 international attendees and over 80 heads of state, ministers, CEOs, and other senior leaders, it presents an opportunity to address issues that matter to foreign investors.
Outlook for 2025
Ultimately, Kazakhstan’s economic diversification is supported by sound policies, which indicate that the market has matured significantly over more than 30 years since its independence. Kazakhstan’s competitive tax regime, strategic infrastructure investments, and expanding technological ecosystem make it an interesting option for investors, an option that should be considered in 2025 in the context of growing competition among global players.
