EDB Monitoring of Mutual Investments — 2023

19 December 2023
The report contains detailed information on the scope, development, geographical and sectoral structure of mutual direct investments of the countries of the Eurasian region from 2016 to 1H 2023. Special attention is paid to a review of mutual investments by companies from the Eurasian Economic Union member states, with special emphasis on their dual role as providers and recipients of capital. The authors also review mutual investments of certain individual countries, including those situated in the Greater Eurasia space (China, Iran, and the Arab states). Investment ties between the countries of the region and Turkey represent a new element of the research.

The Eurasian Development Bank continues its series of EDB Monitoring of Mutual Investments (MMI) publications. The MMI encompasses a database of investment projects, containing detailed information on mutual direct investments in Eurasia, covering Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine. The MMI database also includes information on mutual FDI with other nations such as China, Turkey, Iran and the Arab states of the Middle East and North Africa. The investment database has a bottom-up structure using a variety of open-source information, including corporate statements and other primary data. The data collection methodology allows for keeping track of investments’ ultimate beneficiaries, which distinguishes it from central banks’ statistics.

EDB analysts observe that the Eurasian countries’ FDI stock reached $48.8 billion by mid-2023, following a 5.4% increase in 2022 and with continued growth in 2023.

Mutual FDI stock in Eurasia, $ billions

Figure 1_eng.jpg
Source: EDB MMI database.

Kazakhstan reinforced its status as the regional leader in terms of inward mutual direct investment stock, with a share of 27.2% as of June 2023 against 26.6% in 2021, followed by Uzbekistan (19.8%), Belarus (12.0%), Russia (9.8%) and Azerbaijan (8.7%).

EDB analysts note a rise in the share of commodity sectors in mutual investments among Eurasian nations. These accounted for 37% of investments made by mid-2023, up from 29% in 2016. Concurrently, there has been an increase in the number of high-value-added industries’ mutual projects. The share of manufacturing in total FDI has grown by 6 percentage points to 18% since 2016.

The geopolitical landscape had the greatest impact on financial services, witnessing a decline from 10% in 2021 to 8% in 2022–2023. In previous years, the FDI stock in the financial sector was driven by the establishment of regional bank subsidiaries.

EDB researchers highlight that the FDI stock within Central Asia totalled $1.1 billion by the end of 1H 2023, marking a 1.8-fold increase compared to 2016. The key areas of mutual capital investments are extractive industries, manufacturing and financial services. The leading domestic investors in the region – Kazakhstan and Uzbekistan.

In the medium term, uncertainties may persist in the dynamics of Eurasia’s mutual investments. EDB analysts note the following factors that will shape medium-term trends in mutual investments:

1. “The neighbourhood effect” – the share of EAEU countries in Eurasia’s mutual investments will continue to grow.

2. Dynamic growth in manufacturing. Commencement of production of higher added value products in the countries of the region will be main driver of that growth.   

3. Greater attractiveness of the transport and logistics sector due to shifts in commodity flows and the Central Asian countries’ focus on developing dry ports, logistics hubs and distribution centres.

EDB analysts also note that China and Turkey account for $79.9 billion and $68.1 billion respectively out of the total estimated $158.2 billion of Eurasian countries’ mutual FDI with China, Turkey, Iran and the Arab states of the Middle East and North Africa. China is predominantly a net investor in the region, while Turkey is a net recipient of capital from Eurasian countries.

The mutual FDI stock with Turkey has demonstrated dynamic growth. The average annual growth rate of mutual FDI with Turkey is 13%, while that for China is only 3.2%. Compared to 2016, mutual FDI with Turkey has surged by 2.3 times, witnessing a rise in the number of projects from 99 to 172. Turkish investors have significantly expanded their presence in Central Asia.

Mutual direct investments between Turkey and Eurasian countries, $ billions

Figure 2_eng.jpg
Source: EDB MMI database.

Back to the list