Экономические науки/4.Инвестиционная деятельность и фондовые рынки

Alibekova V. N., Tustikbayev M.

Taraz State University, Master of Finance, student of International IT University, Almaty

Essence and meaning of foreign investments into economy of the Kazakhstan and Kyrgyzstan

“The progress is determined by size, structure of investments, quality and speed of the performance”- says fundamental analysis of scientist’s group in Kazakhstan and Kyrgyzstan. Furthermore scientists’ fixe that without any investments savings and without relevant material resources in investment the positive shift will never occur.

Creating modern capitals, providing internal and external competition will never occur without foreign investments.

The process of updating Kazakhstan’s and Kyrgyzstan’s market of good and services, and whole infrastructure depends for quantity and for quality of foreign investments. Whereby intensive are foreign investments, by that the speed of reproductive process will increase and by that active market change in republics will actively take place.

Nowadays republics take aim to activate necessary investments to create competitiveness of their economies, upgrade and reconstruct operating structure, ensure diversification of the capital to the direction of social oriented structural changes.

Because of this the attracting of foreign investments are becomingone of the main factor whole economical politics of two countries. Without foreign investments countries can’t overcome the economic crisis and develop sustainable growth of economy, which provides growing of national income with balanced macroeconomic index, increase social status of nation, stimulate reproductive skills and market solvency that lead to strong accelerator of whole economy and progressive shifts.

The main role in investing strategy plays reasonable selection investment’s direction. How can this direction apply in Kazakhstan and Kyrgyzstan?

In this case realizing long-term investing projects forms perspective macroeconomic structure of republics, changes in internal and external diversification in labor, determines relevant area of republic in world economic field.

Future economic development of Kazakhstan and Kyrgyzstan need to consider in context and tendency of the world economy. The era of entering two countries in modern century are characterized with great shift in social-economy and technical structure with relevant transformation of economic institutions. Local changes of the economy in each separate country by the time lose its economic potential of development. But economies of those countries integrate with universal economy regulations.

Multinational companies and other big economic companies take huge place in economies of these two countries. “Sum of these multinational companies and their branches occupied economy of these countries”- says experts from Kazakhstan and Kyrgyzstan. These kinds of companies with stable development and companies with regional dynamical system type, product 40% of whole regional goods and services, provide half of regional external transactions, trade new technology and control 40% of capital.

If we add national forms of huge business of each country, we will understand the big shift to the right. This big shift determines economy of each country. Herewith determining factor of progress is economic leadership of the Kazakhstan and weak economy of Kyrgyzstan. Let’s divide into two groups by these criteria:

a. Quick developing, labor performance with medium development of technology andwith medium development of labor performance.

b. Country with backward of technology and labor performance.

After independency Kazakhstan has attracted over 108 billion of dollars of investment. This index is 80% of attracted investment of countries of central Asia.

Nowadays in Kazakhstan works over 20 thousand corporation with participate of foreign companies. Sector of non-primary market consist about 7 thousand of companies. Companies such as “Samsung”, “General Electric”, “Chevron”, “Metro” etc. says leader of nation.

Republic of Kazakhstan is the one of the most attractive country for investments. The last 10 years our county takes place from the top of countries where investment per capita is considered.

The strategy of development 2020 is the main project for Kazakhstan. President of RK sets aim to separateeconomy of RK in order to become innovative country. The main option of RK is to attract more foreign investments. There are 12 prior projects of RK that will implement future plan of new industrialization era. “There are: metallurgy, oil refining and chemical industry, agro-industrial complex, mechanical engineering, building industry, transport, telecommunication infrastructure and etc.”- noted President of RK.

Priority will give to those projects which give opportunity for RK in industrial branches and projects which cost of goods will exceed opportunity cost. Country realize industrial map of country in order to reach aim of industrial-innovative program. By helping of this map government will realize overall 100 republican and regional projects which will cost overall 45 billion of dollars.

The main circumstance of success for those projects is a good attraction of foreign investments, especially in non-primary branches of the economy. Moreover inner companies of RK show rapidly growth of competition. Index in the world of RK’s companies increase. “Index of competition has increased in 2008 for 3 places and in 2008 more for 3 places”- says IMD (international management develop institute). Nowadays our country take 33 place in rating of competition, moreover we outstrip many countries in CIS.

A different picture we observe in Kyrgyzstan. The main goal for politics was attracting foreign direct investments last years. The deficit in budget of Kyrgyzstan prevents creating new innovative industry in country. The inflow of FDI in Kyrgyzstan was 17% or 107 million of dollars in 2001 year. This is 7% of GDP. What is more those investment comes from CIS, especially form Russian and Kazakhstan.

By the end of 2002 year, the investment inflow from Russia increase for 4 times. Russia took 2 places in index of FDI, and placed after USA. If compare two year this year’s investment is more for 70%. Russian private companies want to work in Kyrgyzstan.

There are many reasons for attracting FDI for Kyrgyzstan government. Objective: little volume of inner industry market, uncomfortable placement of country, impossibility to enter to sea, difficult relation with neighborhoods.

Subjective side: big authority of government in regulation of industry in country. Republic of Kyrgyzstan should prevent administrative authority or decrease of authority in administration in order to be more attractive for FDI. Government should service business. Little countries should be more creative in order to survive. Little countries should be quick in choosing alternatives rather than countries with many volumes of mineral resources.

In order to prevent this kind of barriers government provides regulation reforms of system and implements it freely not by force. Kyrgyzstan is the first country in CIS area who implements simplified visa entering. People should only orally tell about his entering to country. Moreover he can make no registration ministry of inner affairs. By doing this action government shows that country is inviting FDI and ready for open economy. Nowadays Kyrgyzstan receives many grants which helps opening new industries.

Investments are the main tool that Kyrgyzstan need nowadays. For entering to world market Kyrgyzstan need competitive market. Technology, good management, labor force, having large budget and having relevant information are main tool of competition. Businessman from Kyrgyzstan such things are unfamiliar. He has not main tools for compete with other foreign businessmen.

Certainly Kyrgyzstan receives grants. But the last 5 years was very hard for economy. In the period of USSR Kyrgyzstan receive about 1 billion dollars every year. Consider that GDP of Republic is 2 billion dollar. Of course Kyrgyzstan takes liabilities from other countries but it helps to survive and increase amount of budget. Kyrgyzstan had released their own currency, made many reforms by helping of those liabilities. Country now oriented to export for the first time in 80 years.

There are several characteristics that attract investors. For example: low cost for labor force, for electricity and rending, high level of education, predictable political situation and wide sphere of using Russian language.

Economical-geographically replacement of Kyrgyzstan is the main factor of quick development. Kyrgyzstan only one country that have border with North China, this country is the member of WTO. Free market with China is one thing that attracts investors. Russia is not member of WTO as well as Kazakhstan and Uzbekistan. Russia’s goods can export form Kyrgyzstan freely. Other perspective sphere is tourism. Nowadays, the number of tourists from Russia is rise. Service is one thing that Kyrgyzstan should improve.

Kyrgyzstan has 6 prior directions where investors can extract profit. Hydropower, mining, tourism, processing of agricultural products, information technologies and services like transport, financial, banking are directions where investors can extract profit. Kyrgyzstan attracts investors from those branches.

Kyrgyzstan attracts 116 million dollars FDI in 2010 years. 7 percent of GDP is the standard index. Index in Turkeyis 0.5%, in Czech Republic, Poland, Hungary 4% FDI of GDP.

In Kyrgyzstan the number of FDI was 650 million dollars in 2011. For last 11 year the maximum number of FDI was 866.2 million dollars in 2008 and 660.9 million in 2009. 48 % of FDI is from Canada, from China 14%, Great Britain 7%, Germany and Kazakhstan 5%, Switzerland and Russia 4%, USA 3% and others 10%. 53 % of FDI goes to processing sphere. 15% of FDI consumed in real estate, 10% financial activities, 12% good and services. 4% consumed in transport, communication and mining sphere and 1% for construction, hotel.

The change in legal norms was main factor that affected for volume of FDI. Change was about tax level of Foreign Investors, facilitated tax regime in region and in preference. Tax rate decreased from 16 to 8%, VAT felt from 20 till 12%.

Agency of controlling and monitoring was created in Kyrgyzstan. There are seven members on board of agency, even president is CEO.

So, capital concentrated in quick developing and in country with big performance of labor. In Kazakhstan the amount of FDI is bigger than in Kyrgyzstan, despite the fact of rich natural resources.

Literature Review

1. “Role of investing in development of country” Kasymbekov T.B. Almaty KazNU 2011

2. “Macro economical index of Kazakhstan” Seyitkasymov G.S. Astana

3. “Economical evaluation of investing projects in condition of market economy” Sydykov K.S., Tologonva A.M.