This week, the media in the region covered several diplomatic events, such as Kazakhstani President Kassym-Jomart Tokayev meeting Kyrgyzstani Foreign Minister Jeenbek Kulubayev and the Prime Ministers of Kyrgyzstan, Uzbekistan, and Tajikistan meeting to discuss border issues. They also reported on several energy-related stories, such as Tajikistani President Emomali Rahmon proclaiming that Tajikistan will be energy-independent by 2027 and Russia announcing its plans to increase gas exports to Central Asia to 15 billion cubic meters. Many outlets concentrated on the Russian police receiving new powers to investigate and deport illegal migrants, as well as the surge in deportations from Russia last year. Multiple sources also reported that Kazakhstan is going to invest $17 billion in transport by 2030 and that Kyrgyzstan is soon to launch a tax amnesty program.

Diplomatic Events

The Prime Ministers of Kyrgyzstan, Tajikistan, and Uzbekistan met at the intersection of their countries’ borders to discuss several border issues (Kun). The meeting represented a significant step forward in regional cooperation. The leaders noted the completion of the delimitation of the Kyrgyzstan-Uzbekistan border and exchanged ratification documents, emphasizing the importance of finalizing the long-awaited delineation of the Kyrgyzstan-Tajikistan boundary. As reported earlier, the working groups responsible for the delineation concluded the Agreement on the State Border on December 4, 2024. The Prime Ministers both concurred that the final documents should be prepared and ratification completed immediately. Concluding the meeting, the three leaders renewed their commitment to regional dialogue and collaboration.

On January 10, Kazakhstani President Kassym-Jomart Tokayev met with Kyrgyzstani Foreign Minister Jeenbek Kulubayev at Akorda (Tengri News). They discussed recent developments in relations and the implementation of previous agreements. They also explored furthering ties, particularly in trade, transport, logistics infrastructure, and investment. This meeting follows President Tokayev’s last visit to Bishkek for the Organization of Turkic States’ summit in November.

Investment

This week, Kazakhstan’s Ministry of Industry and Construction announced that it intends to replace $2.6 billion of imports with domestically produced goods in 2025 (The Caspian Post). The Ministry aims to achieve this by establishing new plants that manufacture vehicles and household appliances. They will implement 190 investment projects over the year, creating 20000 new jobs. Once completed, these projects will produce an output valued at $4.1 billion, with import substitution accounting for $2.6 billion. For instance, a new Chinese motor factory, producing Changan, Haval, and Chery cars, will be built in Almaty. Meanwhile, a new KIA plant will be constructed in Kostanay. According to recent statistics, nearly 70% of all new cars purchased in Kazakhstan are domestically produced (The Times of Central Asia). Karaganda region will also receive $486 million for metallurgical production (The Caspian Post). Overall, the Kazakhstani manufacturing sector is expected to receive $2.3 billion in investments.

According to new data from Kazakhstan’s National Bank, the net inflow of foreign direct investment (FDI) plummeted nearly 32-fold YoY from $2.3 billion to $72.9 million between January and September 2024 (Kursiv). This is the lowest level ever recorded by the bank since it began collecting data in 2005. In 2023, net inflows of FDI had already halved to $3.4 billion. Russia has been Kazakhstan’s largest source of FDI. However, its investments amounted to $931.9 million in 2023, a decrease of 21.4% year-on-year. In 2024, the dramatic drop in net FDI inflows can be explained by the rise in FDI outflows to the U.S., U.K., China, and France. These outflows are due to the repatriation of capital and profits and the repayment of loans to foreign companies. In the first nine months of 2024, the outflow reached $1.5 billion compared to an inflow of $701.5 million during the same period in 2023. Meanwhile, gross FDI inflows totaled $12.7 billion, a decrease of 35.7% year-on-year. The net FDI position, the difference between Kazakhstan’s FDI abroad and the FDI received by Kazakhstan, stood at -$1.6 billion, a slight improvement over 2023 when it was -$3.2 billion. Analysts at the National Bank have criticized how the institution measures FDI, claiming that relying on gross figures distorts the FDI picture in the country. The Business Activity Index, compiled by Freedom Holding Corp., indicated a decline in business activity in Kazakhstan (Kursiv). It fell from 50.8 in November to 49.7 in December. The index asks business owners to compare current business activity to the previous month. Any figure over 50 means expansion, while any figure below 50 signals contraction. Nevertheless, demand and employment remain strong. Prices rose slightly, although inflation increased rapidly in December because of the tenge’s weakness. Overall, businesses remain confident regarding future activity.

Kazakhstan will invest over $17 billion in transport infrastructure up to 2030 (Kazinform). Three new airports will be constructed at the Katon Karagay, Zaisan, and Kendirli resorts. There is a plan to build 4700km of new roads, and the government plans to buy 225 new railway carriages to open the Dostyk-Beskol and Moiynty-Balkhash lines this year. Construction also began on a new container hub at Aktau last year, which will help handle the increasing volumes of cargo traveling along the Middle Corridor.

Elsewhere, the Islamic Development Bank has pledged $40 million to a program enhancing the financial resilience of small and medium-sized businesses in Uzbekistan (Kun). The bank will provide $30 million in Islamic financing for SMEs. In parallel, $7.5 million will be given to a trade development company to guarantee business loans, and the rest will be allocated to capacity-building initiatives, auditing, and accounting. The funding will be available for 10 years. Overall, the financial resilience program aims to attract $100 million in investment to support the SMEs in the country.

Energy

This week, TASS reported that Russia plans to increase gas supplies to Central Asia by 12-15 billion cubic meters annually in the coming years (Kursiv). To boost supplies, Moscow is working with Uzbekistan and Kazakhstan to expand the capacity of the Central Asia – Center (CAC) gas pipeline to 10-12 billion cubic meters. Russia plans to construct another pipeline through Kazakhstan to China, which could supply an additional 10 billion cubic meters to northern Kazakhstan. However, negotiations over the construction of the pipeline are ongoing. 

Nurlan Ramazanov, the head of the energy and housing and public utilities department of the East Kazakhstan Region, announced that they would construct a new 16 MW hydroelectric power plant (HPP) located on the Kalzhyr River (The Astana Times). This HPP will be the region’s fifth and capable of supplying electricity to the entire Marakol district during the Spring floods. They expect the project to be completed in five years. Overall, it will contribute significantly to the region’s energy security and transition away from fossil fuels.

KazTransOil has confirmed that it has transported nearly 10 million tons of Russian oil through Kazakhstan to China last year (Kursiv). Under KazTransOil’s agreement with Rosneft, it will ship another 10 million tons of Russian oil to China in 2025 at $15 per ton. In total, this amounts to $150 million in annual revenue. Meanwhile, Russia delivered another 230,000 tons of oil to Uzbekistan through Kazakhstan in 2024. Overall, it shipped 44.887 million tons of oil (The Astana Times). KazTransOil also reported that it exported 17.3 million tons of Kazakhstani oil last year, a 4% increase compared to 2023 (Kazinform). In other oil-related news, Embamunaigas, a subsidiary of KazMunayGas, began drilling the first exploratory well at the Taisoigan site in the Atyrau Region (The Astana Times).

In an address to the Tajikistani parliament, President Emomali Rahmon declared that Tajikistan would achieve energy independence by 2027 as more units at the Rogun HPP are finished (Interfax). Over 50% of the HPP is completed, and the Tajikistani government has spent more than $820 million on the project over the past two years. Currently, they are also negotiating with international financial and development institutions for $3 billion worth of additional funding. Six international partners, such as the World Bank, the Asian Infrastructure Investment Bank, and the Islamic Development Bank, have promised funds to complete the dam. President Rahmon also highlighted the modernization of the Nurek and Kayrakkum HPPs and the construction of the new Sebzor HPP. He pledged that a new 200 MW solar power plant in Sughd province would begin construction in 2025.

Mining

In 2024, Kazakhstan auctioned off 19 mineral deposits, generating $11 million (Kursiv). In addition, the sale of 25 deposits was announced in November, and the auction is expected to take place on January 29. Kazakhstan recently launched the Minerals.e-qazyna.kz digital platform, enabling companies to obtain exploration licenses online.

Trade

Kazakhstani President Kassym-Jomart Tokayev ratified the free trade agreement between the EAEU and Singapore (The Astana Times). The agreement stipulates that Singapore will remove all tariffs on imported goods from the EAEU and will forgo implementing tariff and non-tariff trade barriers in the future. On the other hand, the EAEU will remove duties on 88% of all imports from Singapore, although this will apply to only 40% of goods at first.

In 2024, Kazakhstan achieved solid trade growth while stabilizing prices (The Astana Times). Infrastructure development and diversification measures contributed to this growth. Domestic trade turnover rose by 13.4% to $116.4 billion. On the other hand, foreign trade turnover reached $116 billion, accounting for 16.2% of GDP. Prices for essential goods stabilized, with growth limited to 1%, thanks to state support for domestic producers. Kazakhstan also established an Export Credit Agency, which distributed $648.8 million in financial assistance to firms exporting non-commodity goods. The country has also sought to expand trade ties by opening new trade offices in China, Türkiye, and the UAE. Between September and December 2024, Kazakhstan also exported 3.7 million tons of grain, a 54% increase compared to the 2.4 million tons it exported in 2023 (The Astana Times). Grain exports to the rest of Central Asia surged, with exports to Iran via Aktau port rising by 30.2 times. This year, the Kazakhstan Food Corporation will aid small and medium farmers in the export market by pooling small harvests together (Kazinform). The project also struck six deals worth $20 million to supply grain and oilseeds to China and other Central Asian countries. Earlier, we reported that Kazakhstan continues to expand its agricultural exports into new markets.

Government finances  

The National Bank of Kazakhstan reported that Kazakhstan’s external debt increased by 2.4% or $3.9 billion to $165.8 billion (Kursiv). Kazakhstan’s largest creditors are the Netherlands, the U.K., and Russia. However, most debt owners are mining companies in Kazakhstan. The mining sector accounts for $79.4 billion or roughly half the debt, despite a decrease of 3.1%, while the financial and insurance industries account for $21.1 billion, an increase of 31.9%. Meanwhile, the public debt rose to $58 billion or 22% of GDP. In other news, Aliya Moldabekova, deputy chair of the National Bank, confirmed that the bank would continue to support the tenge with its financial and gold reserves (Kursiv). She explained that the tenge's weakening resulted from the strengthening of the dollar against most currencies and the Ruble's plummeting value against the dollar. In November, the bank sold $1 billion in forex reserves and another $307.6 million in December to support the tenge. President Tokayev has previously indicated that he believes it is a waste of the bank's resources to support the exchange rate, and that Kazakhstan should consider moving to a more manageable exchange rate.

Elsewhere, President Sadyr Japarov signed a decree to reduce taxes in the Kyrgyz Republic (24.kg). The draft law provides for the abolition of vehicle tax, exemption from payment of any outstanding vehicle tax owed, reduction of property tax on agricultural land to 0% until the end of 2030, ban of tax audits, and writing off any tax owed before 2022. The International Business Council (IBC) commented that the tax amnesty would ease the burden on taxpayers and help entrepreneurs (24.kg). However, they noted that it would not entail complete exemption from all debts as most penalties would remain.

Migration

Russian police will soon have the authority to deport migrants for administrative violations (Daryo). The Russian Duma adopted these changes in August 2024 and will come into force from February 5. In July 2024, the Russian parliament also passed a law on expulsing migrants from Russia. The law stated that those migrants whose documents have expired or have been rescinded or who have committed an offense cannot leave their place of residence while the police decide whether to deport them. Recently, the Interior Ministry announced that these changes will come into effect on March 5. In addition, the police will receive new powers to enter the homes of migrants facing deportation without permission (Orda.kz). They will also be able to access their financial records, location data, and other mobile phone data. This law coincides with a new directive limiting foreigners’ stays in Russia to 90 days annually. In 2024, roughly 80,000 migrants were deported from Russia for violating labor and immigration laws compared to 44000 in 2023 and 26600 in 2022 (Asia Plus). Over half of Russia’s regions implemented bans or restrictions on the employment of migrants in specific sectors of the economy last year (Asia Plus). These new measures follow the Crocus City Hall terrorist attack in March last year and Russia’s subsequent crackdown on illegal immigrants. On December 30, President Putin issued a decree stating that all illegal migrants had until April 30, 2025, to resolve their status.