D.e.sDulambaeva R.T., Ismailova I.H.

Kazakh National University named by Al-Farabi, Kazakhstan

The effectiveness of attracting foreign investment in the economy of Kazakhstan

Investments are the basis for the development and strengthening of the economy in any society. Search of effective areas of the investment climate is needed to carry out their activities in a particular region. They prefer to invest in countries with oil production and a stable economic and legal environment, such as the Middle East, the Americas and the North Sea. However, they are exposed to additional risks associated with entering an entirely new, hitherto closed to most foreign investors, investment market of transit countries [1].

During the global financial crisis, there was a drop in foreign direct investment inflows, but in spite of a negative trend in Kazakhstan remains stable inflow of foreign investments in the post-crisis years.

According to Western experts, the investment climate in Kazakhstan generally favorable, but serious bureaucratic obstacles, financial risks, weaknesses in tax legislation and administration, an underdeveloped legal infrastructure in the area of insurance, mortgages, etc. may hinder the process of flow of foreign capital and investment.

On the other hand, Kazakhstan is considered to be an attractive market for the most basic parameters of the business climate for foreign investors. There is a large market potential, the abundance of natural and human resources. Potentially profitable investment is an essential factor for investors who expect to get more return on investment in Kazakhstan.

Foreign countries have invested 132 billion US dollars in Kazakhstan's economy since 1993 to 2011.

Analysis of the dynamics of foreign direct investment in Kazakhstan's economy has shown that it is possible to note a positive impact on the adoption of laws that regulate investment activity. So, after the adoption in December 1994 of the Laws "On investment activity" and "On foreign investments", foreign direct investment increased by 294 million or 44.5% in 1995.

Law of the Republic of Kazakhstan "On state support of direct investments" was adopted in 1996, which identified the state preferencesthat led to an increase in foreign direct investment of $ 930 million or 50.2%.

Particular growth of foreign direct investments was observed after the adoption in 2003 of the Law of the Republic of Kazakhstan "On investments", so in 2004 he composed and increased by 3,693 million dollars or 2.3 times.

Net foreign direct investment in Kazakhstan amounted to 12.6 billion dollars in 2009; a decrease compared to 2008 was 20.1%. This reduction of direct investments in Kazakhstan amounted to $ 3.2 billion compared with 2008. This is due to a decrease in income from share capital and other capital, while reinvested earnings shows an upward trend.

At the same time, the level of foreign direct investment in Kazakhstan in 2009 was 13.3% higher than in 2007, which amounted to 11.1 billion US dollars. External liabilities of the banking sector decreased by 8.6 billion dollars as a result of repayment of loans and borrowings, as well as bonds and other debt instruments.Overdue indebtedness of banks increased by $ 2.3 billion in 2009.

In 2010, the inflow of foreign direct investment fell by 743 million or 4.6% compared with 2009, due to an increase in overdue loans of banks.

In 2011, total foreign direct investment amounted to 19.85 billion US dollars, an increase compared with 2010 to 1.706 billion US dollars, or 9.4%.

In 2012, the gross inflows of foreign direct investment in Kazakhstan reached a record 28.8 billion US dollars, which is 8.9% or US $ 2.4 billion more than in 2011. Currently actively working are about 8000 companies with foreign capital, including leading companies within the Fortune-500 list, such as Chevron, Siemens, Microsoft, General Electric, Coca-Cola, Danone.

In 2011 and 2012 provided assistance in attracting more than 20 foreign investors. Among the major companies involved may be noted German company – Knauf, the French company – Alstom, the South Korean company – HYUNDAI and LG Electronics.

Notable examples of this year are companies such as Toyota Motor Corporation and Peugeot (on assemblage of cars – Toyota and Peugeot).

In general, according to the rating of the World Bank's on business dealing in 2013 Kazakhstan ranked 49 place out of 185 (56th in 2012), well ahead of most CIS countries.

According to the United Nations Conference on Trade and Development, Kazakhstan took 19th place among the top 20 leading countries in terms of attracting foreign direct investment [2].

Objective analysis shows that conditions of the beginning of reforms in Kazakhstan dictated the need of rapid selection of the model. The basic logic of the reform of the economic structure was built on the model of macroeconomic regulation, which initially involves the natural attrition of inefficient enterprises and the emergence of new, aimed at the production of competitive products. Meanwhile, in the absence of large-scale investment, this goal proved elusive. Foreign consultants offered to make reliance on foreign investment for these purposes.

Foreign capital does not provide large-scale long-term investment in the real economy. As a result, there is a separation of financial capital from the manufacturing sector, which threatens the national interests of the country.

Policy of attracting foreign investment in its current form, according to experts, only led to increased raw material orientation of the economy and lack of attention to other sectors, including agriculture, as well as the inequality in the social development of regions and exacerbate the problems of employment in depressed regions.

There are a number of positive trends in the recruitment and use of foreign investment. It has intensified tendency to increase investment in the service sector.

As a result of these investments has been a marked development of trade and banking services.

New price proportions corresponding supply and demand led to stimulate free movement of capital to price signals.

The transition to market forms of management to increase the share of self-financing investment. It has formed a new market investment infrastructure in the form of various investment funds, insurance, pension and other funds.

The above assessment of the effectiveness in attracting and using foreign capital suggest the implementation of further measures to improve the system and mechanisms supporting those processes in the country, namely:

– Strengthening the role of the state in the process of attracting and channeling investment resources for the development of the real sector of the economy, with emphasis on implementation of domestic savings;

– Creation of conditions for the development of the stock market as an important part of the economy, which permits movement of financial flows from investors to borrowers;

– Activation of bank lending to the real economy;

– Encourage foreign investment while respecting the national interests of Kazakhstan.

In this regard, we believe it is appropriate, consideration of investment problems of the country carried out in the framework of the improvement and development of measures in the following two areas: internal and external, in view of the need for a systematic solution to the problem of creating effective mechanisms to attract foreign investment, in the context of developing sheathe of attracting investment in all sources.

We also believe that we must develop a national investment policy to ensure integrated and balanced solutions to problems of attracting and using investment from all sources. State investment policy should be based, primarily, on the choice of a particular investment strategy of economic development. The world practice today can be called a variety of strategies, based on the practice of any country (Japanese, German, Latin American, Southeast and others experiences).[3]

In this regard, the system of measures to ensure effective involvement and use of foreign investment is becoming a major factor in the economic growth of the country. It is important to emphasize that improving the process of attracting and using foreign capital and investment in Kazakhstan, as a country going through a difficult transformation processes in connection with the transition to market relations, of course, requires increasing investment guarantees and the creation of a favorable investment climate attractive to foreign investors.

In the area of improving the methods of attracting and using foreign direct investment and capital offers the following activities:

– Adoption of a special program to encourage foreign direct investment. The analysis of numerous surveys of potential investors, who carried out by international organizations, shows that few investors continue to hope for improvement, thanks to the adoption of new laws and new government policies.

– Creation of an effective institutional mechanism for the coordination of foreign direct investment. Unfortunately, as business organizations and government: commercial and industrial chamber, special committees are poorly coordinated and coordinate their work with each other.

In general, it should be noted that the formation of an effective system of recruitment and performance of foreign capital and investment in Kazakhstan depends on many problems of political, economic and investment components, the successful solution of which will certainly contribute to the improvement and favoring the country's investment climate.[4]

References:

1. Rimmer M.I. Economic evaluation of investments. – 2011. – №4. – P.

65-71.

2. http://www.mint.gov.kz

3.Әlzhanova N.S. Investment designing.- Almaty, 20074. Ashimbayev T.A.4. Economy of Kazakhstan on the path to market: trends and thinking. Almaty, 1994.