Clare Nuttall in Almaty -

Picture Astana's right bank in 2012. Alongside the Baiterek tower and the blue-domed presidential palace, there will be a new landmark: the Abu Dhabi Palace. This huge complex - designed to look like a 3D bar chart - was inspired by Kazakhstan's economic growth, designed by renowned British architect Norman Foster, and funded from the United Arab Emirates.

The Plaza's developer, Aldar Properties, is one of numerous Middle Eastern investors targeting Kazakhstan's construction sector. For the most part, their focus is on large, high-profile and often politically significant projects. Another example is Aktau City; most of the $38bn needed for this massive project will be provided by private companies from the Gulf states. And while these are their most visible investments, Middle Eastern firms are targeting a growing range of sectors, not least oil and gas, where Abu Dhabi's International Petroleum Investment Company (IPIC) and the Kazakh government have just created the $1bn Falah Fund.

This is a relatively new phenomenon. For several years the Netherlands and the US have provided the highest level of net inflows of capital, accounting for $3.1bn and $2.4bn respectively in 2007. According to the National Bank of Kazakhstan, large Western European economies including France ($1bn in 2007), Italy ($512m) and the UK ($720m) are also consistently large investors, as is Russia ($751m). Turkish investors ($327m) have made numerous smaller-scale investments in Kazakhstan.

But since mid-2007, many western investors have been held back by a lack of liquidity. Meanwhile, the oil rich Gulf states have snatched the opportunity to buy up cheap assets around the world. "We see a lot of groups from both Arabia and South Korea looking at real estate in Kazakhstan. Some have already bought into projects," says Bahitbek Katen, CEO of real estate consultancy NAI Kazakhstan Aristan. "More foreign companies will enter the market as prices are their lowest point."

Orient express

Far Eastern companies are also stepping up their activities in Kazakhstan. Their interest is mainly in its raw materials. Recent deals include the $4.4bn investment by China's Jiuquan Iron and Steel Group in its Kazakh joint venture, and the agreement between Kazakhstan and Japan to increase cooperation in uranium production and nuclear energy. "There are good prospects that Japanese companies are possibly ready to invest over $2bn in our country," Kazakh Environment Minister Nurlan Iskakov said during President Nursultan Nazarbayev's recent visit to Tokyo.

The entry of more Japanese companies to the Kazakh market was the basis for Bank of Tokyo-Mitsubishi's decision to open a representative office in Almaty. Meanwhile, South Korea's Kookmin Bank has also entered the Kazakh market, through its acquisition of a stake in Bank CenterCredit.

New projects on the horizon are already attracting investors from both the Far East and the Gulf. State holding company Samruk had already signed memorandums on joint development of the $4.5bn Balkhash Power Plant with China's Datang and KEPCO from South Korea. Samruk-Energo is now in talks with potential investors from Japan, China and the UAE.

Overall, however, new investors are coming to Kazakhstan from an increasingly wide variety of countries. Investors from smaller European economies such as Spain, Portugal, Denmark and Austria have recently increased their presence, as have Central and Southeast Europe's largest economies Poland and Romania. Despite continuing difficulties in operating in the country - the World Bank rates Kazakhstan 71st out of 178 countries on its Doing Business 2007 index but last in its Trading Across Borders category - the country's natural resources and fast-growing economy continue to draw in new investors.

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