The Impact of the Eurasian Customs Union on Foreign Direct Investment in Kazakhstan

Abstract

This paper adds to the literature that examines the costs and the benefits of the Customs Union between Russia, Kazakhstan, and Belarus by measuring the impact of the Customs Union foreign direct investment in Kazakhstan. To evaluate the Customs Union's impact on foreign investment in Kazakhstan I develop a difference in difference model using data from the World Bank's World Development Indicators. While most empirical research has shown that the Customs Union negatively impacted Kazakhstan, this paper shows how the Customs Union contributed to increased flows of foreign direct investment into Kazakhstan. This result contradicts many western views that Kazakhstan gained nothing from the Customs Union, although it does not provide an overall net economic impact assessment. Because the Customs Union was just the first step of a larger regional economic integration project, this paper presents Kazakhstan with four policy options relating to future integration.