Today, Foreign Direct Investments (FDI) are not merely a key element of international economic integration; they also play the role of a catalyst for economic growth, stimulate innovation, and contribute to the global integration of markets. In recent years, FDI has become an essential channel for technology and knowledge transfer between countries, facilitating international trade by providing access to foreign markets. Therefore, the availability of FDI impacts both productivity growth and national competitiveness.
Global Trends
According to the United Nations Conference on Trade and Development (UNCTAD), global FDI flows increased by 3% in 2023, reaching $1.37 trillion. However, this modest growth was largely driven by the redirection of investments to transit countries, primarily Luxembourg and the Netherlands, due to high interest rates. Excluding these countries, the FDI volume would have declined, both globally (by 18% instead of a 3% increase) and in developed countries (by 28% instead of a 29% growth). FDI inflows to developing countries in 2023 decreased by 9% to $841 billion, representing 62% of global FDI.
Looking at specific countries, the United States, traditionally the largest FDI recipient, saw a 3% decline in foreign capital inflows in 2023.
China also reported a rare 6% drop in FDI inflows for the same year.
In the Association of Southeast Asian Nations (ASEAN), which is usually a growth driver for FDI, inflows fell by 16%. However, the region’s attractiveness for manufacturing investments was underscored by a 37% surge in new project announcements, with significant growth in Vietnam, Thailand, Indonesia, Malaysia, the Philippines, and Cambodia.
India reported a 47% decrease in FDI inflows, but the number of new investment project announcements remained stable, keeping the country among the top five global destinations for new enterprise creation.
In West Asia, FDI remained stable (+2%) due to continuous active investments in the UAE, with new enterprise creation announcements growing by 63% in Saudi Arabia.
In Latin America, Brazil saw a 22% decrease in FDI inflows, while the number of new enterprise announcements remained stable, but international project financing dropped sharply. Mexico reported FDI growth, along with an increase in new enterprises, strengthening its position among the top global investment destinations.
Sectoral trends in 2023 show an increase in projects in industries with extensive global value chains, especially in automotive, textiles, machinery, and electronics. The number of new project announcements and international project financing in infrastructure sectors (including transport, energy, water supply, and telecommunications) overall decreased by 4%, mainly due to reduced funding for renewable energy projects.
The number of international investment projects announced in developing countries related to the Sustainable Development Goals (SDGs), including infrastructure, renewable energy, water and sanitation, food security, healthcare, and education, remained unchanged in 2023. However, international project financing deals related to the SDGs dropped by 27% (with a 40% reduction in financial terms). While the number of projects in food and agriculture saw a slight increase compared to the low levels of 2022, most other sectors experienced a decline.
Expectations
UNCTAD forecasts moderate growth in FDI flows in 2024, as inflation and borrowing cost projections for major markets suggest a stabilization of financing conditions for international investment deals. However, significant risks remain, including geopolitical tensions, high levels of debt accumulated in many countries, and concerns about further disruption to the global economy.
Kazakhstan: FDI Outflow
Gross inflows of foreign direct investment in Kazakhstan in 2023 amounted to $23.4 billion, marking the lowest level since 2018, excluding the pandemic period. Net FDI inflows totaled $3.2 billion, reaching an 18-year low.
Since 2018, net FDI inflows excluding reinvestments have been negative, amounting to -$3.3 billion in 2023. This means that, after adjusting for reinvestments, Kazakhstan has experienced a steady outflow of foreign direct investment over the past six years.
Foreign investors primarily fund the mining sector. Since 2008, FDI structure has shifted, with a decrease in investments in geological exploration and a corresponding increase in mining and manufacturing.
The largest amount of investments in Kazakhstan comes from the Netherlands, accounting for an average of one-third of annual investments, reaching a peak of $8.3 billion in 2022. American investments in Kazakhstan recovered after the pandemic but dropped to $1 billion in 2023, the lowest level in 20 years. South Korea entered the top five foreign investors in 2023, surpassing the U.S.
Meanwhile, Russian investments reached a record $2.9 billion in 2023. Investment volumes from Switzerland have remained stable over the past decade.
Fixed Capital: +₸18 trillion
Assessing the situation in terms of fixed capital investments (FCI), their volume has increased by ₸6,914 billion (+62%) over the past six years, reaching ₸18,044 billion. However, the share of external investments in total FCI has decreased from 30% to 19%, indicating a weakening of Kazakhstan’s investment attractiveness for foreign investors.
The oil and gas industry remains the primary driver of investment activity, but in recent years, there has been diversification and growth in other sectors of the economy. In 2023, the largest share of FCI was directed to the mining and quarrying sectors—₸4,753 billion (26%), real estate operations—₸3,231 billion (18%), and transport and storage—₸2,523 billion (14%).
By region, the largest volume of investments in 2023 was in the Atyrau region (₸3,120 billion), driven by mining projects. Almaty ranked second with ₸1,801 billion, where external FCI accounted for 11.3%.
Most FCI is financed from internal sources—74%, with 16% coming from budget funds and 10% from borrowed funds, of which only 2% are bank loans. Despite the high liquidity of Kazakhstan’s banks, the share of financing for capital expenditures remains relatively low, indicating weak participation of financial institutions in business development and low attractiveness of lending conditions for businesses.
