In the first quarter of 2023, the gross inflow of foreign direct investment (FDI) in Kazakhstan showed high results. However, the actual picture of FDI flows (net inflows minus reinvestments) indicates that Kazakhstan has continued a negative five-year trend of outflow of foreign investments from the country. This is stated in the review by analysts from Halyk Finance, published on July 18.
At the beginning of the review, its authors - Asan Kurmanbekov (Macroeconomics) and Murat Temirkhanov (Board Advisor) - cite three quotes. The first quote is from the government's report of April 11, 2023, which highlights record levels of foreign investment inflows (FDI) in Kazakhstan in 2022. Quote: "In 2022, the gross inflow of foreign direct investment in Kazakhstan amounted to $28 billion, which is 17.7% higher than the results of 2021 ($23.8 billion). This is the highest level in the last ten years - in 2012, FDI reached $28.9 billion."
The second and third quotes are from a thematic publication by the National Bank of Kazakhstan in July 2023. "Historically, Kazakhstan pays special attention to the indicator of gross FDI inflows both in aggregate and in terms of attracting regions and sectors of the economy. However, data on gross FDI inflows are insufficient to understand the real picture of investment flows, as the methodology of such statistics has its own peculiarities.
In international practice, more attention is given to the indicator of net (or net) FDI inflows. This is because this indicator, along with incoming flows, takes into account outgoing flows, which allows for a more objective assessment of the situation with FDI flows," the document says.
And one more excerpt from the same National Bank review: "Considering that the gross inflow of foreign investment does not account for the outflow of funds, and net inflow includes undistributed profit (reinvestments), from the perspective of the true picture of the movement of foreign direct investment funds, attention should be paid to the net inflow minus reinvestments."
Halyk Finance analysts write: "To demonstrate the 'true picture of the movement of foreign direct investment funds,' the National Bank presented a graph of net inflows of foreign direct investment without considering reinvestments in its publication. Based on this graph, it can be seen that when adjusting for reinvestments, a stable outflow of foreign direct investment has been observed over the past five years."
"It is important to note," the company's analysts believe, "that statistics on FDI are published in both gross and net terms, but the government uses the gross inflow of investments as the indicator for planning, despite the fact that it does not reflect the real picture." The authors of the review provide an example: "In the Investment Policy Concept of the Republic of Kazakhstan until 2026, the gross inflow of foreign direct investment is the second of two target indicators (the first being investments in fixed capital). This clearly demonstrates that the situation with foreign investments in the country, despite the externally favorable picture, is negative, and its analysis does not take into account very important nuances."
The authors "fully agree with the opinion of the National Bank of Kazakhstan that, to obtain a true picture of the movement of FDI funds, the government should pay attention to the net inflow minus reinvestments."
The document then presents indicators of foreign direct investment in Kazakhstan in the first quarter of 2023: the gross inflow of FDI amounted to $7.6 billion, net investment inflows - $2.5 billion, and net inflows minus reinvestments showed a negative value (investment outflow) of $601 million.
"Thus, in the first quarter of 2023, the negative five-year trend of outflow of funds by foreign investors from Kazakhstan continued," conclude the analysts from Halyk Finance.
Source: Forbes.kz
CentralasianLIGHT.org
July 19, 2023