In the wake of global economic shifts, Germany’s Zeitenwende, or turning point, is pushing the nation to diversify its markets and supply chains. This strategic pivot, driven by the need to reduce dependencies and manage risks, is opening up new avenues for growth, particularly in Central Asia. At the heart of this opportunity lies Kazakhstan, Germany’s top trading partner in the region, which is actively seeking international help for its own economic transformation.
Kazakhstan, with its balanced foreign policies and ongoing reforms, is eager to diversify its economy beyond natural resources. This aligns perfectly with Germany’s search for reliable partners and its need to rethink supply chain risks in the wake of the Russian energy crisis. The German government’s support for these efforts, coupled with Kazakhstan’s commitment to modernization, creates a prime opportunity for German small and medium-sized enterprises (SMEs) to explore new markets and diversify their operations.
The meeting of these strategic interests is not just a coincidence but a calculated move that could serve as a model for broader EU-Central Asia cooperation. Germany’s Zeitenwende involves more than just defense spending; it’s about building stronger international economic ties and reducing critical dependencies. Kazakhstan, on the other hand, is transforming its economy with a focus on manufacturing, agriculture, renewable energy, logistics, and digital technology. This transformation requires investment, technology, and expertise—areas where German companies, especially innovative SMEs, can play a significant role.
The growing economic partnership between Germany and Kazakhstan is evident in their trade figures. In 2023, bilateral trade hit €8.75 billion, with Kazakhstan exporting mainly crude oil and other raw materials to Germany. German exports to Kazakhstan, valued at €3.23 billion, primarily consist of high-value manufactured goods. This trade pattern shows room for diversification, particularly as Kazakhstan seeks to modernize its industries and reduce its reliance on oil and gas exports.
German investment in Kazakhstan is increasing, aligning with the country’s diversification goals. President Kassym-Jomart Tokayev noted a 64 percent rise in German direct investment in 2023, reaching $770 million. This investment is not just about raw materials but about value addition, with about 90 percent of Germany’s cumulative investment going into Kazakhstan’s non-resource sector. This long-term perspective is likely to receive strong government support, as seen in the record number of German company branches opening in Kazakhstan in 2023.
Kazakhstan is actively working to attract investment by improving its business environment. Initiatives aim to reduce barriers, increase transparency, and offer incentives like tax breaks. The national agency Kazakh Invest supports foreign investors, and a high-level Investment Headquarters addresses investor issues. These efforts, coupled with Kazakhstan’s commitment to achieving carbon neutrality by 2060 and significantly increasing renewable energy’s share, make it a compelling market for German SMEs.
Key sectors for German SMEs in Kazakhstan include manufacturing and high-tech, energy transition and renewables, logistics and the middle corridor, agriculture, and mining and critical raw materials. Each of these sectors offers opportunities that match German expertise and align with Kazakhstan’s development goals. For instance, Kazakhstan’s aim to achieve 15 percent renewable energy by 2030 opens up vast potential in wind, solar, green hydrogen, and energy efficiency.
Navigating the Kazakh market requires planning and support. Institutions like the German Chamber of Commerce Abroad (AHK Central Asia) and Germany Trade & Invest (GTAI) offer market insights and practical help. Within Kazakhstan, Kazakh Invest assists foreign investors, providing a crucial support network. However, risks such as bureaucracy, potential corruption, and economic fluctuations need to be managed. Thorough research, using support networks, finding reliable local partners, and understanding the legal environment are essential steps.
The alignment of Germany’s diversification needs and Kazakhstan’s development goals presents a timely opportunity for German SMEs. Kazakhstan offers access to its market and a gateway to Central Asia, backed by a strong political relationship. Key sectors such as manufacturing, renewables, logistics, agriculture, and critical materials offer prospects that match German expertise. While challenges exist, support institutions can help navigate them. For well-prepared SMEs, Kazakhstan is a strategic market worth exploring now to participate in its economic transformation and secure future growth.
