Political and economic condition of Republic of Kazakhstan

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Foreign direct investment is attainable where there is a good business relationship between the investing companies or parent company and its subsidiary company located abroad (Anthony, 1993). The main factors which will determine if a foreign direct investment can take place are the political and economic prospects of the foreign country. This paper discusses the economic and political status of the Republic of Kazakhstan.

The transition to market economy is a journey that started 17 years ago from the former soviet economy to a free market economy. After independence from the Soviet Union in 1991, the high rate of inflation and economic decline that was witnessed in the early parts of 1990’s Kazakhstan engaged itself into a series of political, economic and social reforms. Currently the economic reforms are geared towards diversifying the economy more particular is to remove the economic reliance on natural resources and focus on developing other key sectors of the economy, investment included.

Foreign investment in Kazakhstan economy has increased because investors are attracted to the country by the fact that economy of the country has be experiencing tremendous growth, evidence is shown by figures which show that about eighty percent of all capital inflows that went to the central Asia region were direct towards the country’s economy with the European Union topping the list in terms of source of investments. Arromdee (1992), in his studies show that this sharp raises in foreign investment is due to the economic reforms made, stable institutions that have being set up and the development experienced in the banking sector (Arromdee, 1992).

Both the developed, developing and under developed countries are caught in a neck to neck competition for foreign direct investment to go into their countries. Thus the need to promote each individual’s country investment opportunities that can be tapped by potential foreign investors.

Recommendation for improvements

Kazakhstan should take the advantage of its strategic location which put it at a better place to become the center of business in central Asia with ready markets form Russia and China. To gain competitive advantage over other country Kazakhstan should focus on creating conducive business environment together with political stability and increase the incentive granted their local companies that want to participate in direct investment abroad. All this will be attainable if there will be zero tolerance to corruption cases, improving of the education standards and the logistical infrastructure.

Political institution should be strengthen by instituting professional training for government officials, engaging the local government in the developments of clusters, design a process to ensure that the political environment is transparent in its deal and consistent, institute professional civil service with transparent rules and performance based promotion.

References

Anthony, J., 1993, “Equilibrium Locations of Vertically Linked Industries,” CEP Discussion Papers dp0137, Centre for Economic Performance, LSE.

Arromdee, V., 1992, “State Characteristics and the Location of Foreign Direct Investment Within the United States , Coughlin, Terza .