Internationalization of production in Kazakhstan and its economic implications: the role of foreign investment and transnational corporations

Sammanfattning: This licentiate thesis examines the development of internationalization of production in Kazakhstan and its economic implications over the period 1991-2010. The main objectives of the thesis are to investigate the role of foreign investment and TNCs in the economic growth of Kazakhstan since its independence in 1991 and onward, to explore the motives that foreign enterprises have for investing in Kazakhstan, and to understand how the internationalization of production affected the Kazakhstani economy during the period 1991-2010. In order to address these objectives, the thesis utilizes Dunning’s eclectic paradigm to analyze the determinants of foreign investment in Kazakhstan. It also explores whether FDI in Kazakhstan is resource-seeking or market-seeking. The foreign investors are mainly interested in the extractive industries in Kazakhstan. In the period 1991-2010, on average 76 percent of the total FDI in the country was attracted to the primary sectors, mainly to oil and gas extraction, while the share of market-seeking investment was less than 3% of the total FDI inflow to Kazakhstan. The assessment of the Investment Development Path of Kazakhstan over the last two decades suggests that the level of development of the country may correspond to either stage II or III. The relatively high income level of Kazakhstan supports the conclusion that the country is entering stage III; however, the changes of inward and outward FDI in Kazakhstan, leading to increasingly negative NOI positions, characterize a country at stage II of the IDP. The second stage of the IDP is also characterized by significantly increasing inward FDI due to the development of some L-specific advantages that raise the country’s attractiveness to TNCs. However, outward FDI remains very limited because the O-advantages of domestic firms are still weak.