Consequences of the current global challenges

After the invasion of Ukraine, it became clear that now Russia can be expected to make any, even frankly absurd, decisions in any field in relation to any country. Today, it has practically lost its meaning to talk about rational actions or expectations, to forecast mid- and long-term positive development trends, if there is a suspicion that one of the factors influencing the situation will be the Russian political machine. But the probability of the implementation of negative scenarios (if there is a Russian trace) is growing catastrophically.

Demonstrative manifestations of independence and detachment from Russia’s aggressive plans by the leadership of Kazakhstan, open non-recognition of the «republics», a sharp increase in the defense budget, refusal to violate sanctions in economic relations with Russia, readiness to engage in alternative (to those imposed by Russia) economic ties (in particular , transportation of oil to Europe bypassing Russia) are all links that clearly indicate that Russia is losing another «brotherly nation» [3].

The Russian leadership is even more nervous, firstly, that the Kazakh leadership did not see the point in being «grateful» to Russia, which at the beginning of the year helped to extinguish the outbreak of large-scale protests in the country (although their main motive was supposedly inflationary, but, probably, partly inspired Russia itself), and therefore support any scenario proposed by the Kremlin. Secondly, Kazakhstan, instead of joining the aggression, provides humanitarian aid to Ukraine, and the leaders of both countries demonstrate mutual respect and maintain good contacts.

Along with this, let’s pay attention to two more internal factors that are specific to the current Kazakhstan.

Foreign investment factor. It should be recalled that Kazakhstan’s economy was in a very weak state after the collapse of the USSR. Thus, the GDP per capita of Kazakhstan at purchasing power parity (PPP) in 1990 amounted to only $4,716 (Ukraine — $5,433), the country ranked 54th according to the Human Development Index (HDI) (Ukraine — 45). It seemed that the post-Soviet legacy — political clannishness, rawness of industry, low welfare — would hamper the country’s development for a long time to come.

However, the country found a good niche, the use of which significantly accelerated economic growth and development, which prompted international experts to classify Kazakhstan as one of the new «Asian tigers». The country made one of the main bets in its economic policy on attracting investments, opened opportunities for a wide influx of foreign capital, considering the policy of attracting foreign direct investments (FDI) to the national economy as a key factor in the country’s development. For this, a series of reforms aimed at opening up the economy and modernizing its production structure and infrastructure were introduced [1].

In particular, the creation of 12 special economic zones, in which significant tax incentives for investors were introduced, and the management’s attention was aimed at preventing the deterioration of the investment climate, deserve attention. Investors appreciated such efforts properly and the results were not long in coming — today the cumulative accumulation of FDI in Kazakhstan (since the early 1990s) has reached $320 billion.

It should be noted that although initially the volumes of attracted FDI were relatively small (less than $1 billion per year), even such volumes for a weakened economy had a significant impact — in the early 2000s, the annual inflow of FDI reached 8-12% of GDP. As you know, capital always «attracts» capital, and the subsequent FDI promotion policy stimulated the growing volume of attracted FDI (up to $12-14 billion). Meanwhile, in terms of GDP, the inflow of FDI already «weighed» less, since the national economy itself grew during this period, and therefore it is ready to receive increasingly large amounts of capital (diagram «Foreign direct investment in the economy of Kazakhstan»).

[pic 1]

Figure 1. Foreign direct investment in the economy of Kazakhstan [3]

So, over the past 5 years, leading corporations and companies from the Netherlands ($33.8 billion), the United States ($19.4 billion), Switzerland ($12.5 billion), China ($6.2 billion), France ($4) have become the main foreign investors. .7 billion). And even in the conditions of growing political risks and the war in Ukraine, FDI inflow in the 1st quarter. 2022 reached $6.9 billion.

Significant FDI, which comes from leading countries, in addition to the macroeconomic component of GDP formation, also acquires a security factor. The fact is that the presence of significant assets in leading industries owned by foreign capital, in case of attempts to seize them or obstruct their activities by foreign forces, will be classified as a direct terrorist act, which threatens large-scale human losses, including foreign personnel. Please note that in the event of a Russian attack on Kazakhstan, both European and American corporations, as well as Chinese ones, may be at risk. That is, the consolidated position of all the world’s largest countries (including the USA and China) to protect assets from a common aggressor will «naturally» appear here. Therefore, Russia will face opposition from global leaders with an easily predictable result.

That is, significant volumes of diversified workers in the FDI country become a sufficiently reliable protection against external (Russian) aggression. This fully applies to Kazakhstan, which, as indicated, is a regional leader in the development of the national economy, including relying on international capitals [2].

Socio-political factor. Russia had a «chance» to seize Kazakhstan in January 2022, when the Kazakh society turned out to be agitated, overflowing with mass protest moods, to overcome which Russian «peacekeeping» troops were introduced. However, it is likely that already at that time the leadership of Russia was targeting Ukraine and, realizing that even a «peacekeeping» mission requires significant military resources, decided «not to exchange» and not to be distracted from priority plans. Obviously, assuming that after the capture of Ukraine, Kazakhstan itself will bow to the winner, especially considering the weakening of the Kazakh leadership.