In his Address dated September 1, 2020, the Head of State noted that a new instrument – the strategic investment agreement-will be introduced to fix the agreements between the state and investors.
Improving the investment climate is particularly relevant in the context of the crisis caused by the COVID-19 pandemic. According to estimates by UNCTAD (United Nations Conference on Trade and Development), the crisis will cause a sharp decline in Foreign Direct Investments (FDI) in 2020 and 2021. Global FDI flows are projected to decline by 40% in 2020 compared to 2019 ($1.54 trillion in 2019) and fall below US $1 trillion for the first time since 2005. This will be facilitated by a decrease in the profits of the largest multinational companies (hereinafter referred as TNCs), which are the main investors. For example, revenue forecasts for fiscal year 2020 for the 5,000 largest TNCs show that the average downward revision since the outbreak is 36%. In addition, we should note a decrease in gross accumulation in the structure of Kazakhstan's GDP, which decreased to 20% in the first quarter of this year (27% in 2019). This trend indicates a decrease in investment activity.
Therefore, support for a favorable investment climate in the current conditions is necessary to restore economic growth, in which the stability of legislation will play an important role. So, according to the World Bank Report "On global investment competitiveness 2019/2020: Restoring investor confidence in times of uncertainty", the regulatory environment was one of the three main factors for foreign direct investments in 2019, along with political and macroeconomic stability. Then there are such factors of the investment climate as human capital, low taxes, market size, and others.
Thus, the conclusion of a strategic investment agreement will help protect the interests of investors when changing legislation, which, in turn, will help ensure a favorable investment climate and will have a positive impact on the country's economic and social development.
