FOREIGN DIRECT INVESTMENT AND ECONOMIC DEVELOPMENT: THE CASE OF KAZAKHISTAN

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Foreign direct investment (FDI) may play a crucial role in the economic structure of developing economies. It is frequently argued that FDI can significantly enhance the economic growth of host countries by contributing to the human capital formation, technology transfer, inducing the domaestic investment, and by improving accees to the global markets. This study examines these argumants for the Kazakhistan case. The Kazakhistan economy attacted large amounts of FDI after gaining independency in 1991. Recently the annual FDI flows reached allmost 20 billion dollars, amounting to 5-6 % of GDP. As such, Kazakhistan was able to attract 56 % of FDI flowing to the landlocked developing economies. The analysis shows that FDI in Kazakhsitan enhanced the growth rate especially during the last decade. On the other hand, overconcentation of foreign direct investment in the primary sector (mainly in the exploration and extraction of oil, natural gas, and other mines) has also created serious drawbacks. Lack of FDI in manufacturing industries limits the expected positive effects of FDI, such as technoloy transfer, spillover effects, access to global markets, and export diversifacation. The concentration of FDI in the energy sector has also deepened the dependency of the Kazakhistan economy on energy exports and as such may create serious problems in the long-run growth of the Kazakh economy.

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Foreign Direct Investment , economic growth , Kazakhistan economy JELClassification: F21 , F43

Ege Strategic Research Journal

31

Ege Strategic Research Journal