Investing in Kazakhstan: Asia’s Overlooked Powerhouse
October 20, 2017
Businesses and investors are looking at Asian markets more than ever. It’s no secret that this dynamic region is growing faster than anywhere else on the planet.
Everyone looks at the usual targets first: China, Thailand, Japan and the rest of Asia’s large economies. There’s nothing inherently wrong with these countries but they’re too flooded with foreign capital.
We think there’s far more opportunities in places where everyone else isn’t going. How about investing in Kazakhstan?
Kazakhstan, a nation of 18 million people, is central Asia’s largest economy and a former member state of the USSR. They’ve arguably become the region’s biggest success story since the Soviet Union’s collapse in 1991 and now have a GDP per capita which exceeds Russia’s.
But they aren’t exactly a bastion of liberty. President Nazarbayev has ruled over Kazakhstan’s one-party political system for nearly three decades.
Places like Singapore (and indeed Kazakhstan) are proof that lack of personal freedom doesn’t make somewhere bad to invest in though. Look at the Heritage Foundation’s Economic Freedom Index and you’ll find little relation between democracies and free economies.
Vast oil reserves, pro-investment policies, and a strategic position should lead to a bright future. But we think Kazakhstan’s location is their greatest asset.
That’s because Chinese businesses and the government itself are financing billions of dollars’ worth of infrastructure in nearby countries. New railways, ports, and other projects are popping up all over Asia.
Many of these projects have to do with China’s New Silk Road, also known as the One Belt One Road (OBOR) Initiative.
Beijing’s goal is creating a modern version of China’s historic Silk Road from centuries past. They’re setting up ways to move products and materials across Eurasia, from Mongolia to France.
The New Silk Road will provide obvious economic benefits. But China’s soft power will also rise since they’ll operate crucial infrastructure around the world. You’re more likely to side with people who own your rails and roads in the event of a major conflict, after all.
Looking at a map makes Kazakhstan’s geographic importance clear.
How does this relate to investing in Kazakhstan? Well, you’ll notice that moving between China and Europe is difficult without going through them. Land routes which don’t involve Kazakhstan mean either going through the volatile Middle East or detouring through Siberia.
Either way, China’s New Silk Road is impractical without Kazakhstan. This means lots of investment, new infrastructure, and favorable terms which should propel their economy.
How to Invest in Kazakhstan
There’s several options for investing in Kazakhstan. But they all require visiting the country first.
Foreign individuals can only buy property in Kazakhstan if they’re a permanent resident, which is a difficult status to get. Foreign businesses can also own property though. It’s probably easier to form a company and purchase real estate through its name instead of applying for residency.
Property in Kazakhstan is fairly valued once you jump through the hurdles. You can buy central real estate in the nation’s largest city of Almaty for under US$1,500 per square meter. That’s very fair for an upper-middle income economy.
The Kazakhstan stock exchange is sizable with 130 listed firms and a market capitalization of US$42 billion. With that said, you’ll need to hop on a plane to open a brokerage account. We’re not aware of any ways to open a Kazakhstan brokerage account without visiting.
Of course, you can also start a business in Kazakhstan – an actual one, not just a property-holding company.
Foreigners can own 100% of a Kazakhstan LLC (Limited Liability Corporation). Most international firms do business in the oil & gas, manufacturing, tourism, and tech industries. Companies which invest in “strategic sectors”, which all the aforementioned industries are part of, get generous tax incentives.
Investing in Kazakhstan is difficult right now, but barriers to entry are good if you can break through them. The country has clear potential and isn’t yet flooded with foreign capital. Now is a great time to put forth some effort and enter the market.